I’m a Financial Advisor: The 5 Best Places To Invest Your Cash When Interest Rates Fall

The Federal Reserve’s long-awaited interest rate cut finally arrived in September, when the central bank lowered its benchmark overnight lending rate by a quarter percentage point.

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That marked the Fed’s first rate cut of 2025 — but it probably won’t be the last. At least two more cuts are expected before the end of the year, according to economists polled by Reuters. The consensus is that each of those cuts will also be by 25 basis points.

When interest rates fall, it’s important to adjust your financial strategy to ensure the best possible returns.

“As rates fall, many savers are wondering where they can get the highest yields on their cash. However, higher yield doesn’t necessarily need to mean more risk,” said Rob Williams, head of wealth management research at Charles Schwab. “It is important that investors who want to generate more income in their portfolios are doing so in a manner that aligns with their unique risk appetite and target asset allocation — particularly at a time when the economy is still finding its footing.”

Here are five of the best places to invest your cash when interest rates fall, according to Williams.

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Certificates of Deposit

Even after the Fed’s September rate cut, the best CD rates are “still very competitive, with many yields above 4%,” Williams said. “Locking in today’s yields guarantees higher future returns even as the Fed continues to drop rates.”

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High-Yield Saving Accounts

Williams said it is “likely” that banks will lower interest rates on high-yield savings accounts, but he noted that most yields are still above 4%.

“[They] are still much higher than average and remain one of the more attractive options for savers looking to park their cash,” he said.

Investment-Grade Corporate Bonds

Highly rated corporate bonds (AAA-BBB) currently offer yields around 4.5% to 5.5% based on credit rating and length of maturity, Williams said.

“This allows investors with long investing horizons to lock in strong fixed income returns for five to 10 years with relatively low default risk, regardless of future Fed rate cuts,” he added.

Municipal Bonds

“Some munis are paying a tax-equivalent yield of 4.5%-7.5%, making them a great opportunity to secure a high yield while maximizing tax advantages,” Williams said. “Munis are especially compelling for high earners or residents in high-tax states, backed by generally strong state and local government finances.”

Dividend-Paying Equities and REITs

Stocks with sustainable dividends — including real estate investment trusts — offer income streams that “often hold up well when rates fall,” Williams said.

“A good rule of thumb is to look for dividend stocks yielding at least as much as a 10-year Treasury, which is currently a little over 4%,” he added.

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This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: The 5 Best Places To Invest Your Cash When Interest Rates Fall