In the world of investing, portfolio diversity is one of the most important aspects of long-term stability and growth. The reason? No one stock, industry, or opportunity is free of risk. However, careful distribution of cash across different investing opportunities can help hedge against some of this risk. One of the more stable investing methods can be the purchase of bonds. While that may induce some yawns, there are bonds for every portfolio strategy.

In the case of bonds, the investor chooses to become a lender, ultimately collecting interest on the loan he or she provides. Typically, the safest bonds a retail investor can purchase are those issued by the U.S. Treasury, as they are always paid back to the investor on time and to the agreed interest adjustment. Moreover, since the U.S. government can always levy increased taxes to pay its debts, a default on the investor’s loan is exceptionally unlikely.

Treasury Inflation-Protected Securities (TIPS)

When looking at bonds as a long-term investment, one of the first concerns for investors is the impact of inflation on their returns. Since bonds take time to mature and return a yield, they are subject to the fluctuating value of fiat currency. In other words, providing the government a loan of your own money, only to get back a 4% yield during times of double-digit inflation can seem pointless. 

This is where Treasury Inflation-Protected Securities, known as TIPS, come into play. Though their interest rates are low, these types of bonds provide a layer of inflation security like no other investment can. That’s because these types of bonds do not have a fixed principal on which interest accrues. Rather, the government, which is borrowing money from you, must adjust the original principal of the money you loaned them and continually pay interest on that amount as it inflates or deflates with the relative value of the dollar.

TIPS are now issued only electronically, which means no paper bonds and have maturity terms of five, 10, or 30 years. The interest rate is always above 0.125% on TIPS and is selected at the time of the auction with interest being paid to the bondholder every six months.

Floating Rate Notes

For investors looking for a more short-term bond play, floating rate notes are essentially debt instruments that allow the lender’s investment to become more lucrative as interest rates go up. Since the notes only take two years to mature, investors can more accurately time their buying and return schedule based on the current benchmark interest rate.

With the current fund interest rates heightened by the Federal Reserve’s attempt to combat inflation, now could be a good buying time for floating rate notes. Moreover, due to the relatively short maturation period and quarterly interest schedule, these investments can be a good method for storing extra cash in a safer investment structure while being able to access it over a shorter schedule.

Furthermore, the structure of floating rate notes goes beyond the U.S. Treasury, so they can be purchased from issuing corporations as well. This can allow for a more diverse approach to buying debt securities. As such. investors looking for a low-commitment way to start investing in bonds should consider the short-term benefits of sequestering cash through floating rate note bonds for every portfolio they hold.

U.S. Treasury 10-Year Note ETF (UTEN)

If the thought of picking the right bond investing structure seems too daunting, bond-related exchange-traded funds (ETFs) can offer a simpler alternative. One such ETF is the U.S. Treasury 10-Year Note ETF (NASDAQ:UTEN). Like all other U.S. Treasury-issued securities, UTEN’s backing comes from the full faith credit stability of the U.S. government, which significantly decreases the investment risk.

The UTEN ETF, however, strikes an investing sweet spot for many risk-averse buyers, as its yield of 4.46% puts it in competition with high-yield savings accounts issued by private banks. The difference? Investors in the UTEN are not subject to the liquidity crises of over-extended banks or defaults. 

Thus, while not the most exciting option among bonds for every portfolio type, the UTEN can be a stable way to store and accumulate cash over time. Moreover, due to the rate hikes of the last few years, the fund’s entry price is close to its all-time low, making it a valuable investment in the event of rate cuts.

On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.