With markets roiled by volatility and interest rates staying elevated, cash is once again a compelling asset class.Investors are increasingly looking for safe, income-generating places to park their idle money—without locking it away for too long or taking on undue risk.
Short-Term Treasuries and Money Market Funds Lead the Way
According to financial advisors, Treasury bills and money market funds have become go-to options for investors seeking both safety and yield. Yields on 3- and 6-month T-bills are currently hovering near 5.2%, with money market funds offering similar returns while retaining daily liquidity. The appeal lies in their low-risk profile and easy access, especially in uncertain markets.
Money market mutual funds have continued to attract inflows, with trillions of dollars currently sitting in these vehicles. Their structure, backed by short-term government or corporate debt, allows investors to earn steady interest while maintaining flexibility to reallocate quickly if opportunities arise.
Online Banks and High-Yield Savings Accounts
Online-only banks and fintech platforms are also offering highly competitive high-yield savings accounts, often exceeding 4.5% in annual interest. These accounts, typically FDIC-insured, offer better rates than traditional brick-and-mortar institutions, reflecting the shift toward digital-first banking.
However, advisors warn that while attractive, these accounts are still vulnerable to rate reductions if the Federal Reserve shifts to an easing stance later in the year.
CDs Still Offer Value—But Timing Is Crucial
Certificates of deposit (CDs) continue to be a solid option for those willing to lock up their funds for slightly longer terms. Short-term CDs (6–12 months) are delivering yields in the 4.5% to 5.25% range, though financial planners suggest avoiding long-term CDs in a potentially changing rate environment.
Some advisors are now encouraging a “CD laddering strategy”, which staggers maturity dates and allows investors to reinvest periodically, adapting to interest rate movements without sacrificing liquidity.
The Case for Liquidity and Flexibility
Despite appealing yields, experts still emphasize the importance of maintaining flexibility. Cash is useful not only for generating income but also for seizing buying opportunities if markets correct. Keeping idle funds “working,” without overcommitting, has become a cornerstone of portfolio strategy in 2025.
Advisors increasingly recommend allocating 10% to 20% of portfolios to cash or cash-like instruments, depending on an investor’s risk tolerance and time horizon.
