7 Conservative Investment Options to Preserve Principal and Earn Steady Returns in 2026
If you’re a do-it-yourself investor, a retiree, or someone approaching retirement, one of the most common questions you’re probably asking is:
“Where can I put my money to keep it safe, earn a reasonable return, and avoid unnecessary risk?”
In this article, we’ll walk through seven conservative investment options designed to help preserve principal while still earning steady interest in 2026. These strategies are especially relevant if you’re holding excess cash in a low-yield bank account and want your money to work a little harder—without taking on stock market volatility.
Before diving in, one important reminder:
Even for conservative investors, a long-term retirement plan still typically requires meaningful exposure to stocks to outpace inflation. These options are best used for cash reserves, short-term needs, or the conservative portion of your portfolio—not as a replacement for long-term growth assets.
1. High-Yield Online Savings Accounts and Money Markets
One of the simplest ways to earn more on your cash is through high-yield online savings accounts or online money market accounts.
Many large brick-and-mortar banks still pay little to no interest on savings. Online banks and credit unions, however, often offer significantly higher yields.
Key features:
FDIC-insured (up to applicable limits)
High liquidity
No market risk to principal
Websites like Bankrate and NerdWallet make it easy to compare current rates and read reviews. While everything is done electronically, transfers between your checking account and the savings account are usually seamless.
This option is ideal for emergency funds and short-term cash you may need access to quickly.
2. Brokerage Money Market Funds
If you have a brokerage account at firms like Vanguard, Fidelity, or Charles Schwab, you may have access to money market funds that often pay more than traditional bank savings.
Unlike bank accounts, these funds are not FDIC insured, but they are designed to maintain a stable value (typically $1 per share).
Examples:
Schwab Value Advantage Money Market (SWVXX): ~3.58% seven-day yield
Vanguard Federal Money Market (VMFXX): ~3.68% yield (with a $3,000 minimum)
Important note: Money market yields reset frequently as interest rates change.
These funds are excellent for idle cash inside brokerage accounts.
3. Short-Term Bond Funds
For investors willing to accept slightly more fluctuation in exchange for a higher yield, short-term bond funds can be a strong alternative.
Unlike money markets, bond funds can fluctuate in value. However, ultra-short-term funds aim to keep volatility minimal.
Example:
JPMorgan Ultra-Short Income ETF (JPST)
30-day SEC yield: ~3.88%
Monthly income
Relatively stable net asset value
These funds can be useful when money market rates are less attractive and you still want conservative income.
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4. Short-Term Certificates of Deposit (CDs)
CDs offer a guaranteed rate of return over a fixed time period.
Current competitive rates include:
~4.0% for 1-year CDs
~3.6% for 3-year CDs
You can purchase CDs directly from banks or use brokered CDs through firms like Schwab or Fidelity. Brokered CDs allow you to hold multiple CDs from different banks inside one brokerage account, simplifying management.
Trade-off: Higher yield than savings, but limited liquidity until maturity.
5. U.S. Treasury Bonds
Short-term U.S. Treasury bonds are considered one of the safest investments available.
Current yields:
1-year Treasury: ~3.53%
3-year Treasury: ~3.57%
Advantages:
Backed by the U.S. government
Minimal price volatility for short-term maturities
Exempt from state income tax
Treasuries can be purchased through brokerage accounts or directly from the U.S. Treasury.
6. Fixed Annuities
Fixed annuities are insurance products that pay a guaranteed rate of interest for a set period, often three years or longer.
Current examples:
~4.1% for 3 years (minimum investment ~$100,000)
~3.85% for smaller minimums
Pros:
Predictable returns
Higher yields than many CDs
Cons:
Limited liquidity
Potential penalties for early withdrawals
Earnings taxed as ordinary income
Fixed annuities may work for investors willing to trade flexibility for certainty.
7. Series I Savings Bonds (I Bonds)
I Bonds are designed to protect purchasing power by adjusting returns for inflation.
How they work:
Fixed rate: ~0.90%
Inflation adjustment every six months
Current combined yield: ~4.03%
Key considerations:
$10,000 annual purchase limit per taxpayer
Must hold for at least 1 year
Redeeming before 5 years forfeits 3 months of interest
Federal tax deferred until redemption
I Bonds can be a powerful long-term conservative holding, especially during inflationary periods.
Final Thoughts: Don’t Let Cash Sit Idle
Holding large amounts of cash in a low-interest bank account can quietly erode your purchasing power over time.
Whether you choose high-yield savings, money markets, CDs, Treasuries, or inflation-protected bonds, the key is aligning your choice with:
Liquidity needs
Risk tolerance
Tax considerations
Your overall retirement plan
If you’re unsure how these options fit into your retirement strategy, having a written plan makes all the difference.
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Have a great week, and we’ll talk again next Tuesday.
Written by Ryan Morrissey
Founder & CEO of Morrissey Wealth Management
Host of the Retire with Ryan Podcast