The 3 Safest and Best Ways to Invest $5000


Only have $5000 to invest? With US inflation reaching 8.6% in June, every dollar in your pocket is losing value, and there are many ways to invest at better yields than savings accounts safely. Here are the best three ways.

1. Buy U.S. Treasury I-bonds

Up until October 28, the U.S. Treasury I-bond was paying a whopping 9.62% annual interest on Series I bonds. And while that unprecedented rate is gone, the current not-too-shabby rate for bonds issued between November 1, 2022, to April 30, 2023, is 6.89%.

These bonds are virtually risk-free, as they are backed by the US federal government. The rate will stay with the bond as long as you hold it – up to 30 years. You can redeem (cash in) an I bond any time after 12 months. However, if you redeem the bond in less than five years, you will forfeit the last three months of interest.

For example, if you were to redeem your bond after 18 months, you would collect the first 15 months of interest.

You can buy up to $10,000 per individual electronically each calendar year through, plus an extra $5,000 in paper bonds if you designate them as a tax refund, MarketWatch reported.

2. Purchase certificates of deposit (CDs)

A great risk-free form of investing over the short term is with a certificate of deposit (CD). These investment instruments are typically offered by almost all banks and credit unions that lock in a lump-sum deposit for a certain designated time period for a non-volatile, guaranteed rate of return at an interest amount that’s higher than savings accounts.

The downside is you can’t touch the money for the entirety of the term; otherwise, you will risk penalty fees and lose interest.

Common durations are three, six, eighteen months, or full-year increments, although occasionally, there are special promotions with unusual durations, such as 13 or 21 months, according to Investopedia.

3. Invest in a Money market account

A money market account is like a savings account but also shares the features of a checking account (such as ATM and bill pay). However, they pay higher interest than both, according to the Motley Fool. They also pay monthly interest payments similar to a CD, but at a lower APY, US News reports.

The biggest advantages of money market accounts are that they do not lock your money up, and they are FDIC-insured bank accounts, so it is risk-free up to $250,000. Most pay higher APYs than even high-yield savings accounts.

The downsides: Some (but not all) require minimum deposits and charge monthly fees, so it’s important to shop around. Unlike checking accounts, money market accounts are limited to six transfers or withdrawals per month by federal law, just like savings accounts. Exceeding the limit will accrue per-transaction fees.

Money market accounts are geared toward short-term savings but are not a good fit for long-term savings, which would be better served by CDs or other types of investments.