With yields on even the most liquid "safe harbor" investments topping 5 percent, putting cash in savings, money markets and CDs is increasingly attractive. "The rising interest rates [of] the past two years lifted the returns on cash investments to the highest levels in five years," says Greg McBride, a senior financial analyst with Bankrate.com. "Those returns come without risk, and investors are protected by FDIC insurance."
Which cash vehicle is best depends on your investment goals, time horizon and tax situation. Changing interest rates means cash allocation should be determined by goals and risk tolerance rather than recent returns. Says McBride, "Find [an investment mix] consistent with your long-term goals."
Jennifer Pellet is a freelance writer specializing in business and finance.