Where to Find A Decent Return

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 and still sleep soundly?

One way is to replace low-yielding money-market accounts with certificates of deposit. You'll earn more interest, and if you choose a bank CD backed by the Federal Deposit Insurance Corp., your investment will be insured.

The downside is that your money is tied up for the term of the CD, typically from three months to five years.

But you can keep your CD investments somewhat more liquid by building what is known as a "ladder." Start by putting equal amounts into CDs with different maturities. As the first CD matures, reinvest the money into a new CD with your longest chosen time horizon. That way, you will regularly unlock a portion of your money while the balance is parked in something that yields more than the shortest-term instruments.

"Rather than shopping for who's got the best five-year rate, the idea is just to break it up a bit," said Karen Schaeffer of Schaeffer Financial in Rockville. Many of her clients are buying three-, six- and 12-month CDs "so that when interest rates start coming up again, they'll always have something coming due" that can be reinvested at a higher yield, she said.

The main pitfall to avoid when you ladder is complacency. If rates rise and higher-yielding opportunities open up elsewhere, Schaeffer said, you don't want to be too dulled to see them.

If you're prepared for a little edgier investment, consider Ginnie Mae bonds, financial experts said. These are bonds guaranteed by the Government National Mortgage Association and made up of repackaged home loans insured by government agencies such as the Federal Housing Administration. Yes, they're tied to mortgages, and yes, they conjure up thoughts of woebegone Fannie Mae and Freddie Mac. But 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, currently yielding 4.96 percent, or the Fidelity Ginnie Mae Fund, yielding 4.85 percent.

"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.

If you're still hungry for higher yield and ready for another dimension of risk, check out corporate bonds. Their yields have surged to unprecedented levels, but default rates also are rising, which means you're best off sticking to companies with high credit ratings and stable balance sheets, said financial adviser Frank Ruffing of Farragut Resources in McLean.

AT&T, Hewlett-Packard and American Express bonds are among the issues offering rich yields for the risk of holding them, he said.

"If an American Express five-year note is going to pay me 7.75 percent on my money until July 2013, sure that's risky -- anything can happen in five years. But for it to really be dangerous, you would have to see AmEx get $22.5 billion of market capitalization erased before they got to your principal," he said.