The Days of the 5% APY CD Are Over: Here's Where to Put Your Money Now

In 2023 and 2024, it was fairly easy to secure a certificate of deposit with an interest rate of 5% or more. That's because the Federal Reserve was aggressively upping key interest rates to combat inflation. And while there are still high interest rate CDs available, most offer yields closer to 3% or 4%.

Still want to earn 5% or more on your money with minimal risk? One investment vehicle in particular stands out.

This Vanguard ETF delivers big income with minimal volatility

As the old saying goes, there's no such thing as a free lunch. As interest rates fall for CDs, the only way to maintain high income potential is by adding a bit of risk. But fear not: You don't need to risk everything for an extra percentage point or two. Just take a look at the Vanguard Emerging Markets Government Bond ETF (NASDAQ: VWOB).

As its name suggests, this ETF invests primarily in government bonds issued by emerging market countries. Roughly 14% of the fund, for example, is invested in bonds issued by Saudi Arabia. Mexico, Turkey, Indonesia, and the United Arab Emirates round out the rest of the top five holdings. While there is some currency exchange risk given these countries typically price their bonds in local currencies, the fact that countries control their own money supply mitigates some of this extra risk.

Image source: Getty Images.

Right now, the Vanguard Emerging Markets Government Bond ETF has a yield of 5.67%. With an expense ratio of just 0.15%, that means your total income rate should exceed 5% per year. Just remember: The value of your principal will fluctuate. In most years, the fluctuation will only be a few percentage points up or down. But on occasion, double-digit moves are possible.

With stock markets historically very expensive, and CD rates dropping, investors looking for extra yield will need to look for alternatives. The Vanguard Emerging Markets Government Bond ETF is a promising option worth exploring.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.