5 Safe Investments in a Weak Economy

The stock market has dropped like a heavy anchor lately. According to some estimates, recent losses in the markets have consumed more than $2 trillion in assets. Economic uncertainties related to the credit crunch, a weak housing market, and rising unemployment rates have many investors looking for safer investments, such as various products offered by banks. These include certificates of deposit (CDs) and money market accounts. These and similar investments, while safe, don't offer great returns. Some of the best yields are around only 3 or 4 percent. Treasury bills are the safest, but an economist friend likes to point out that nobody gets rich from investing in Treasuries except the government. Presently, these bills yield only 1 or 2 percent. Here are three safe investments that offer better returns with less risk.

1. Certificates of Deposit - I know, CDs seem boring, but in today's economy they can look awfully attractive. With CDs, you exchange easy access to the money for a better return. In other words, the longer you're willing to lock up the cash you invest, the better return you'll get. A five-year CD, for example, could net a 5% return, better than you'll get on a 1- or 2-year CD. Shop around among different banks for the best returns on CDs. An added benefit of CDs is that they come with Federal Deposit Insurance Corporation (FDIC) protection.

2. Money market accounts - Bank money markets can yield a little better than 3 percent, beating even most money market mutual funds, which hover around 2.5 percent. Bank money markets, like CDs, offer FDIC protection. In addition, you have access to the cash if you need it.

3. Municipal Bonds - Munis offer the benefits of tax-free income, as well as less volatility than with corporate bonds. Most mutual fund companies offer funds that specialize in tax-free munis. Yields vary by fund, but can be as high as 6 percent. Municipals are an especially good deal for people in higher tax brackets because of the tax-free income these instruments offer.

4. Online Savings Accounts - Because online banks have less overhead (no branch buildings, for example), they can offer higher yields than their traditional walk-in counterparts. You also have 24-hour access to the money. Some online savings accounts offer returns of better than 3 percent. Online savings accounts, like savings accounts at traditional banks, offer FDIC protection.