Good investments can still be found

CDs and bonds offer opportunities

Risk is out of the question. But the safest investments deliver almost nothing, especially now when interest rates are at record lows. So how do you squeeze out a decent return?

* Replace low-yielding money-market accounts with certificates of deposit backed by the Federal Deposit Insurance Corp.

To keep your money from being tied up for three months to five years -- typical CD terms -- build a "ladder." Put equal amounts into CDs with different maturities. As the first CD matures, reinvest the money into a CD with your longest chosen time horizon. That way, you regularly unlock a portion of your money while the balance is parked in something that yields more than the shortest-term instruments.

* Consider Ginnie Mae bonds, which are guaranteed by the Government National Mortgage Association and made up of repackaged home loans insured by government agencies such as the FHA. Unlike Fannie Mae and Freddie Mac bonds, securities insured by Ginnie Mae have always had the explicit backing of the federal government.

The easiest way into Ginnie Maes is through a mutual fund that specializes in them, such as the Vanguard GNMA Fund or the Fidelity Ginnie Mae Fund.

"Ginnie Maes would probably be the safest option after a straight Treasury bond," said John Coumarianos, a mutual fund analyst for Morningstar. "The only risk you really face with them is prepayment because they are mortgages." When home loans are paid off early, that curbs the interest payments to bonds that are backed by the mortgages.

* Check out corporate bonds. Their yields have surged to unprecedented levels, but they do come with a higher level of risk. Because default rates are rising, stick to companies with high credit ratings and stable balance sheets, said financial adviser Frank Ruffing, of Farragut Resources in McLean, Va.

* If you're comfortable with corporate securities, another area to consider is preferred stocks. They rank below bonds in safety, but they get priority over common stock when it comes to dividend payouts or, in the case of bankruptcy, the distribution of assets.