Conservative investments are supposed to be the calm in a financial storm—the low-risk places we park our money when we want security over growth. But in 2025’s economic environment, that traditional wisdom is starting to show its cracks. Inflation, rising interest rates, and sluggish growth have all chipped away at the value of many so-called “safe” investments. And the worst part? Most people don’t even realize it’s happening until their purchasing power has already slipped away.
The term “safe” used to mean stable and dependable. But today, it often means stagnant—or worse, stealthily shrinking. The following eight investments are commonly considered low-risk, yet many are losing ground against inflation, fees, and opportunity costs. If these assets make up a large portion of your portfolio, it may be time for a second look.
1. Certificates of Deposit (CDs)
CDs have long been a go-to for conservative savers seeking guaranteed returns. But in an era of sticky inflation and dynamic interest rate changes, many CDs are failing to keep pace with the actual cost of living. Locking in at 3% for five years may sound stable, but if inflation hovers around 4%, you’re actually losing purchasing power each year.
Even worse, breaking a CD early to reinvest at a better rate often comes with penalties, making these vehicles more rigid than they appear. What once seemed like a protective move can end up costing more than it saves.
2. Treasury Bonds with Long Maturities
U.S. Treasury bonds are often considered the safest investments around. But those with long maturities—10 years or more—have become a liability for many retirees and conservative investors. Why? Because when interest rates rise, the market value of these bonds drops.
If you’re forced to sell before maturity due to a financial emergency or strategy shift, you may realize a substantial loss. Meanwhile, the bonds’ fixed payouts may be far below what newer offerings are yielding, leaving your money stuck in underperforming territory.
3. Whole Life Insurance Policies
These policies promise a combination of insurance and investment, often marketed as a “guaranteed” return. But the reality is, the cash value component in many whole life policies grows at a glacial pace. After factoring in administrative fees and the cost of the insurance itself, the actual rate of return can be shockingly low, sometimes under 2%.
For policyholders banking on this vehicle as a core retirement asset, the slow appreciation can quietly drain wealth and reduce flexibility when it matters most.
4. Money Market Funds
While money market funds offer liquidity and safety from market volatility, they’re not immune to value erosion. Most currently yield between 4% and 5%, which might sound solid, until you compare that to inflation and taxes. Once those are accounted for, your “growth” might actually be flat or even negative in real terms.
And because money market funds are often used as parking spots for cash, people forget to monitor them closely, allowing these silent losses to accumulate over time.
5. Annuities with Fixed Returns
Fixed annuities promise dependable payouts, which can feel comforting in retirement. But many of these products come with high fees, limited liquidity, and inflexible terms. Worse yet, the returns are often barely above the rate of inflation, meaning your purchasing power can steadily decrease, even while you’re receiving income.
In many cases, the money you’re guaranteed isn’t growing at all. It’s just being returned to you over time, with a small layer of interest that barely keeps pace with rising living costs.
6. Savings Accounts with Sub-Par Interest Rates
Despite rate increases in recent years, many traditional savings accounts at brick-and-mortar banks still offer abysmally low interest rates, some under 1%. Savers may not feel the pinch day-to-day, but over a period of years, that sluggish growth creates a serious gap between what you have and what you need.
While these accounts may feel “safe,” they’re arguably among the worst offenders when it comes to silent value erosion, especially for retirees relying on interest for income.
7. Municipal Bonds in High-Inflation Areas
Municipal bonds are often favored for their tax advantages and relatively low risk. But in states and cities experiencing budget strain, inflation, or declining population, these bonds can lose value in unexpected ways. Lower yields, increasing default risk, and deteriorating infrastructure can all quietly degrade their performance.
Investors chasing the tax-free angle may overlook the fact that their after-inflation return could be zero or even negative, particularly if they’re relying on bonds issued in financially unstable municipalities.
8. Corporate Bond Funds with Low Duration
Short-duration bond funds are often pitched as a safe hedge against volatility. But many of these products hold corporate bonds with low yields and limited upside. In 2025, as companies face tighter margins and rising borrowing costs, even stable corporations may offer lackluster returns on these bonds.
When held in tax-deferred accounts, the underperformance may go unnoticed. But when relied upon for current income, these funds can be a quiet drag on your entire financial strategy.
Safety Shouldn’t Mean Sacrificing Value
Many investors build their portfolios around “safe” assets in hopes of avoiding drama. But in today’s shifting economic environment, that desire for security can backfire, leading to quiet losses that compound over time. What feels secure on the surface may actually be siphoning value behind the scenes.
If you’re nearing retirement or already living on a fixed income, now is the time to reevaluate your assumptions. A well-balanced portfolio doesn’t avoid risk entirely—it manages it wisely, in a way that protects both principal and purchasing power.
What’s in Your “Safe” Bucket?
Are you relying on one of these quiet underperformers in your portfolio? Have you taken steps to reassess your retirement income strategy in light of inflation and changing rates?
Read More:
8 “Low-Maintenance” Investments That Require Constant Oversight
4 Big Investments That Are Worth the Money
Riley Jones is an Arizona native with over nine years of writing experience. From personal finance to travel to digital marketing to pop culture, she’s written about everything under the sun. When she’s not writing, she’s spending her time outside, reading, or cuddling with her two corgis.
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