Shield your portfolio with conservative investments.

Investors are enjoying robust returns this year. But the financial markets can surprise with reversals at any time. Conservative investments tilt toward lower returns than their riskier counterparts. In the midst of the current 10-year bull market, conservative investments can also provide a shield against a market tumble. If you're squeamish about losses and want to remain invested, here are seven conservative investments to consider this year.

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Cash investments

Cash investments include bank certificates of deposit, high-yield savings accounts, money market mutual funds and investment, in which the principal remains fixed. Investors in cash investments can access their money without a risk of loss. In exchange for this security, returns are lower than stock investments. Currently CD rates range from 2.75% to 3% for one to five years. Money market mutual funds that are offered by investment firms typically generate higher yields than a bank savings account. Current money market yields range from 2.29% for Schwab’s Value Advantage Money Fund (ticker: SWVXX) to 2.45% for Vanguard’s Prime Money Market Fund (VMMXX).

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Shield your portfolio with conservative investments.

Investors are enjoying robust returns this year. But the financial markets can surprise with reversals at any time. Conservative investments tilt toward lower returns than their riskier counterparts. In the midst of the current 10-year bull market, conservative investments can also provide a shield against a market tumble. If you're squeamish about losses and want to remain invested, here are seven conservative investments to consider this year.

Cash investments

Cash investments include bank certificates of deposit, high-yield savings accounts, money market mutual funds and investment, in which the principal remains fixed. Investors in cash investments can access their money without a risk of loss. In exchange for this security, returns are lower than stock investments. Currently CD rates range from 2.75% to 3% for one to five years. Money market mutual funds that are offered by investment firms typically generate higher yields than a bank savings account. Current money market yields range from 2.29% for Schwab’s Value Advantage Money Fund (ticker: SWVXX) to 2.45% for Vanguard’s Prime Money Market Fund (VMMXX).

U.S. government bonds

Anyone can open a TreasuryDirect.gov account and purchase U.S. Treasury bonds, bills and notes online. Treasury bills yield roughly 2.4%, with maturities that range between four and 52 weeks. “I am surprised how few people avoid using the U.S. government's own website at TreasuryDirect.gov, which is highly popular with China, Japan and many foreign central banks. Perhaps, most investors don't know that they too can lend money to the U.S. government and obtain the same rates as everyone else who is submitting noncompetitive purchases,” says Steven Jon Kaplan, CEO of True Contrarian Investments. Since 30-year U.S. Treasury bonds average a 3% yield, U.S. government debt might be the safest investments available.

Short-term bond funds

Fixed-income investments come in a variety of flavors including government, corporate and municipal bonds. Bond investments are loans to the issuer, with diverse maturities and coupon rates, which are the yields paid on fixed-income securities. For the safest fixed-income investment, choose a short-term government bond fund like GMO U.S. Treasury Fund (GUSTX), with a 2.33% one-year return. Last year, the Morgan Stanley Institutional Short Duration Income Portfolio (MPLDX) earned 3.31%. For high-income investors, municipal bond funds offer attractive yields. The Capital Group Core Municipal Fund (CCMPX) earned a lofty 3.83% federal tax-free return last year. To compare taxable and tax-free yields use an online tax-equivalent yield calculator.

High-dividend stocks

Dividend aristocrats, stocks that have a history of increasing dividends, are popular conservative investments. Depending upon the analysis time period, dividends have contributed from 30% to 60% of the S&P 500’s total return. Kenneth Ameduri, chief editor at CrushTheStreet.com, says that the elite dividend-paying companies perform better and show less volatility than the S&P 500 index overall. Several of Ameduri’s current favorites are: Kimberly-Clark Corp. (KMB), priced at $123 a share with a dividend yield of 3.3%; Anheuser-Busch InBev ADR (BUD) at $89 per share with a dividend yield of 3.9% and Aflac (AFL) at nearly $49 per share with a dividend yield of 2.2%. Fund investors can tap this equity class in their 401(k) investment options.

Mining and blue-chip companies

Zachary Mannes, senior analyst at ElliottWaveTrader forecasts a declining market during 2019 or 2020. He recommends several conservative stock picks for the coming year. Several of Mannes picks also come with high yields to cushion any downward price movement. His technical analysis favors precious metals and miners as safe stocks this year, particularly Freeport-McMoRan (FCX), which is priced at $14.12 per share with a 1.5% dividend yield. Mannes also endorses three blue-chip stocks: AT&T (T) at $32.14 per share with a dividend yield of 6.3%; Ford Motor Co. (F) at $9.38 per share and a dividend yield of 6.6% and United States Steel Corp. (X) at $16.67 per share with a dividend yield of 1%.

Real estate crowdfunding

Real estate crowdfunding allows investors to own a piece of a large real estate project. This asset class tends to be less volatile than public market real estate investments, according to Adam Hooper, co-founder and CEO at RealCrowd. For instance, investing in affordable multifamily housing offers cash flow and a stable conservative investment, Hooper says. This sector is especially compelling with low inventory and the high demand for affordable housing. Some, although not all, real estate crowdfunding firms are available to wealthy investors and lack liquidity. Despite these drawbacks, for investors seeking to own real estate directly, without the management headaches, this is a conservative investment strategy to add to a diversified portfolio.

Alternative investments

Investors seeking ways to protect their capital seek asset classes less correlated with the stock and bond markets. An alternative investment like agriculture offers passive income and a hedge against inflation, says Austin Maness, chief operating officer at Harvest Returns in Fort Worth, Texas. For timber and farmland projects, Harvest offers access to investments in specific agriculture ventures. Market neutral funds, another alternative investment, attempt to provide capital appreciation with downside risk protection. Although, these funds typically charge high management expense ratios. Long-short funds also attempt to actively protect capital from losses holding both long and short positions. While underperforming this year, these funds may shore up future stock and bond declines.

Consider these conservative investments.

Cash investmentsU.S. government bondsShort-term bond fundsHigh-dividend stocksMining and blue-chip companiesReal estate crowdfundingAlternative investments1 of 10

Barbara Friedberg, Contributor

Barbara A. Friedberg, MBA, MS is a veteran investment portfolio manager, fintech consultant ...  Read more

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