Want to Beat the Best CD Rates (5.15% APY)? This Wealthfront Account Could Do It

Based on the latest economic indicators and public statements from the Fed, it appears that interest rates are likely to stay at 5% (or higher) for the foreseeable future. That means now could be a good time to open a certificate of deposit (CD) or one of the best savings accounts.

But what if you want something different for your savings that offers a chance of higher yield? Wealthfront is offering a unique new alternative to CDs: the Automated Bond Portfolio. This account lets you invest in bond ETFs with professional guidance from the Wealthfront robo-advisor team. As of April 9, 2024, it was generating 5.49% variable APY -- higher than even the best CDs (5.15% APY).

Let's look at a few reasons why the Wealthfront Automated Bond Portfolio could be a better fit for your savings than even the best CDs.

Wealthfront Automated Bond Portfolio: More liquid than CDs

The biggest drawback of CDs, even with rates at 5.00% APY or higher, is that you have to lock up your money for the length of the CD term. If you pull your deposit out early, you'll have to pay early withdrawal penalties.

Our Picks for the Best High-Yield Savings Accounts of 2024

SoFi Checking and Savings APY up to 4.60% Rate info You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet. Min. to earn $0 Open Account for SoFi Checking and Savings Member FDIC.	APY up to 4.60% Rate info You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet.	Min. to earn $0
Citizens Access® Savings APY 4.50% Min. to earn $0.01 Open Account for Citizens Access® Savings Member FDIC.	APY 4.50%	Min. to earn $0.01
American Express® High Yield Savings APY 4.25% Rate info 4.25% annual percentage yield as of June 1, 2024 Min. to earn $1 Open Account for American Express® High Yield Savings Member FDIC.	APY 4.25% Rate info 4.25% annual percentage yield as of June 1, 2024	Min. to earn $1

The Wealthfront Automated Bond Portfolio doesn't charge any penalties. It's more flexible than CDs are and works more like a savings account. You can withdraw your cash from your Wealthfront Automated Bond Portfolio account at any time. But ideally, you should be willing to commit your cash to this account for at least one year.

Bond prices can go down, and there is some risk of losing part of your investment principal if you sell your bond investments before maturity. You won't be charged a penalty if you need your money sooner, but you're more likely to get the best return on investment (ROI) from the bond market if you can leave your money invested for a while.

Managed risks and higher potential ROI than CDs

Investing in bonds can be difficult. Not everyone has the time, energy, or financial expertise to research different bonds and decide which ones to buy and hold. Wealthfront makes it easy. Its Automated Bond Portfolio gives you a robo-advisor to manage your bond investments -- with a personalized, optimized selection of bonds. You get automatic rebalancing, tax-loss harvesting, dividend reinvestment, and professional support along the way.

Wealthfront will help you invest in bonds based on:

• Where you live: If you pay state income taxes, Wealthfront might recommend tax-exempt bonds.
• Your annual income: Improve tax efficiency of your bond investments.
• Investment goals: Access a diversified blend of U.S. Treasury bonds, municipal bonds, higher-yield (but higher-risk) corporate bonds, and more.

Based on the latest performance of the bond market, as of April 9, 2024, the Automated Bond Portfolio was generating a 30-day SEC yield of 5.49% -- after Wealthfront's 0.25% annual advisory fee. The yields on this investment are not fixed (like a CD), but if you're willing to commit your money and accept a slightly higher amount of risk and uncertainty, you could beat the best CD rates.

Another Wealthfront bond account to save money on state income taxes

If you live in a high-tax state like California or New York, you might want to consider another newly launched bond investment account from Wealthfront. The Wealthfront Automated Bond Ladder invests only in U.S. Treasury bonds, so the interest is exempt from state and local income taxes. If you're a high earner in a state like California, you might be better off investing in the Automated Bond Ladder instead of the Automated Bond Portfolio -- and instead of getting charged state income tax for the interest you'd earn on a regular bank savings account or CD.

The recent performance of the Wealthfront Automated Bond Ladder, as of May 14, 2024, is generating 5.10% to 5.27% variable APY. That's a little bit lower than the Automated Bond Portfolio, but still higher than most of the best CDs. And since the Bond Ladder is only invested in U.S. Treasuries, that 5.10% to 5.27% ROI that you earn is tax-free at the state level! (You'll still have to pay federal income tax.)

Bottom line

Investing in bonds is getting easier than ever, and potentially more lucrative than CDs, thanks to the Wealthfront Automated Bond Portfolio and Automated Bond Ladder. These innovative bond investment options give people a powerful alternative to CDs, savings accounts, and money market accounts.

If you're willing to commit your money for one year (or less), and willing to accept a slightly higher amount of risk than a standard bank account, Wealthfront can help you maximize the return on your cash with diversified, intelligently managed bond ETF investments.