Investing: Cash Makes A Comeback

(2 of 2)

As rates hovered at abysmal levels, some investors boosted returns with near cash equivalents, such as ultrashort-bond funds, which returned an average 0.93% over the past year, about double what money-market funds did. If you have a chunk of cash you won't be tapping for a year or so--perhaps college-tuition bills are on your horizon--you might try a fund like SSgA Yield Plus, with a 30-day yield of 1.17%, or Fidelity Ultra-Short Bond, yielding 1.33%. Just remember: as rates rise, bond prices fall, offsetting some of that extra yield. And if you sell too soon, you might be hit with a redemption fee. Even among the cash happy, rising rates don't solve everything.