In 2025, selecting the best fixed-income investments is essential for achieving steady returns and ensuring financial stability. Options like online savings accounts, certificates of deposit (CDs), and corporate bonds offer low-risk, predictable income. Defined-maturity bond ETFs and municipal bonds provide enhanced diversification, tax advantages, and higher yields.
These fixed-income investments help build a stable portfolio, providing reliable income streams while balancing risk.
By choosing the right mix of fixed-income investments, investors can safeguard their capital and maintain long-term financial security in an unpredictable market environment.
1. Online Savings Accounts: A Safe and Accessible Option
Why Invest:
Online savings accounts are a top choice for investors looking for low-risk fixed-income investments. While traditional banks offer very low yields, online savings accounts usually provide better returns. The best online savings accounts in 2025 offer annual percentage yields (APY) ranging from 0.50% to 0.80%.
Real Example:
For instance, Ally Bank offers a competitive 0.50% APY on its online savings account. Although this yield is modest compared to historical norms, it’s still better than the rates offered by most traditional banks, making it a strong contender for fixed-income investments.
Bonus:
The primary advantage of online savings accounts is their FDIC-insurance, ensuring your deposits are protected up to $250,000 per depositor, per institution. These accounts provide a secure and simple way to earn modest returns, making them ideal for conservative investors focused on fixed-income investments.
Risk:
While safe, online savings accounts typically offer low real yields after adjusting for inflation. If interest rates rise, these fixed-income investments may seem less attractive compared to alternatives that offer higher returns.
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2. Certificates of Deposit (CDs): A Lock-In for Higher Returns
Why Invest:
Certificates of Deposit (CDs) offer a fixed return over a set period, making them a popular choice for those seeking secure fixed-income investments. One-year CDs in 2025 provide rates up to 0.85%. While these rates are lower than in past years, they still offer greater returns than online savings accounts.
Real Example:
Marcus by Goldman Sachs offers a one-year CD with an APY of 0.85%, which is better than what many traditional banks provide. For longer-term fixed-income investments, Synchrony Bank offers a 5-year CD with an APY of 1.00%.
Bonus:
CDs lock in your rate for the term, offering predictable returns. Certain types of CDs, like no-penalty CDs, allow early withdrawal without incurring fees, giving them added flexibility for those invested in fixed-income investments.
Risk:
The key risk with CDs is the opportunity cost: if interest rates rise, you might miss out on better returns. Additionally, penalties for early withdrawal can eat into the benefits, limiting your access to funds.
3. Corporate Bonds: Higher Yields with More Risk
Why Invest:
For those seeking higher returns than government bonds, investment-grade corporate bonds are attractive fixed-income investments. Corporate bonds offer yields as high as 2.00%, significantly better than the 0.70% return on 10-year U.S. Treasury bonds. Additionally, they are low-risk investment options.
Real Example:
Apple Inc. is an example of a company that issues corporate bonds with yields of around 2.00%. With its strong balance sheet, Apple’s bonds are considered low-risk, making them an appealing option for investors seeking fixed-income investments.
Bonus:
Corporate bonds provide higher yields compared to government bonds. For instance, bonds from stable companies like Johnson & Johnson and Microsoft offer relatively safe options for investors who want higher returns from their fixed-income investments.
Risk:
Corporate bonds come with credit risk—if a company faces financial difficulties, it could default on its debt. Additionally, if interest rates rise, the value of corporate bonds may drop, making these fixed-income investments vulnerable to market fluctuations.
4. Defined-Maturity Bond ETFs: A Strategic Blend of Bonds
Why Invest:
Defined-maturity bond ETFs, such as Invesco’s BulletShares ETFs, combine the benefits of bond funds with the predictability of individual bonds. These ETFs invest in bonds that mature at a specified time, offering investors the certainty of when they will get their principal back. For example, the BulletShares 2025 Corporate Bond ETF (BSCP) offers a yield of approximately 2.21%.
Real Example:
One example of a defined-maturity bond ETF is Invesco’s BulletShares 2025 Corporate Bond ETF (BSCP), which focuses on corporate bonds maturing in 2025. Another example is the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), which provides exposure to high-quality corporate bonds for those seeking steady returns from fixed-income investments.
Bonus:
These ETFs offer diversification by holding a variety of bonds, while providing a clear exit strategy with a set maturity date. They’re perfect for investors who want to manage risk while still benefiting from predictable income from fixed-income investments.
Risk:
Defined-maturity bond ETFs are not risk-free. If interest rates rise, these ETFs could lose value, as with individual bonds. Additionally, ETFs can hold bonds that are subject to higher default risks if not managed properly.
5. Municipal Bonds: Tax-Free Income for High-Income Earners
Why Invest:
Municipal bonds are a fantastic option for those seeking tax-efficient fixed-income investments, particularly for high-income earners. The income from municipal bonds is typically exempt from federal income taxes and may be exempt from state taxes as well, offering higher after-tax yields.
Real Example:
An example of a popular municipal bond is the California State General Obligation Bond, which offers tax-exempt income to investors. Another option is New York City Municipal Bonds, which are issued to fund local development projects and offer tax advantages, making them an attractive choice for those seeking tax-efficient fixed-income investments.
Bonus:
Municipal bonds provide tax-free income at the federal level, and often at the state level, which can significantly enhance your returns, especially if you are in a high tax bracket. For investors looking for fixed-income investments that reduce tax burdens, munis are a top pick.
Risk:
Although municipal bonds are considered safe, they do come with risk. Some municipalities may face financial difficulties, which could lead to default. Additionally, municipal bonds tend to have lower yields compared to corporate bonds or other fixed-income investments, making them less appealing for those seeking higher returns.
Final Thoughts
As we enter 2025, the key to successful fixed-income investments lies in balancing risk and return. For conservative investors, options like online savings accounts and CDs provide safety, though they come with lower yields. Meanwhile, investors willing to take on more risk can benefit from higher-yielding corporate bonds, defined-maturity bond ETFs, and municipal bonds.
Remember that diversification is essential when building a portfolio. Fixed-income investments help stabilize a portfolio, generate steady income, and offer tax advantages for high-income earners. However, it’s essential to evaluate each option’s risks and rewards to ensure they align with your financial goals for 2025 and beyond.
By understanding the landscape of fixed-income investments and choosing wisely, you can build a portfolio that offers financial stability and steady returns, even in uncertain times.
FAQs
What are fixed-income investments?
Fixed-income investments are financial assets that provide regular, predictable returns, such as bonds, savings accounts, and CDs.
Which fixed-income investment is safest in 2025?
Online savings accounts and certificates of deposit (CDs) are the safest fixed-income investments, offering low risk with predictable returns.
How can fixed-income investments help with financial stability?
They provide steady income, reduce portfolio volatility, and offer protection against market downturns, ensuring long-term financial security.