Best Low-Risk ETFs to Replace CDs
CDs aren't the only way to keep money safe while generating interest. These low-risk, cash-like ETFs are liquid and flexible potential substitutes.
If you're looking to keep a meaningful amount of money safe, perhaps to pay tuition next semester or to fund a down payment on a home, a certificate of deposit (CD) is often one of the first investment options that comes to mind.
CDs are popular because they offer a risk-free way to save. Your principal is guaranteed and insured up to certain limits by agencies such as the Federal Deposit Insurance Corporation. That combination of stability and predictability makes them a go-to choice for short-term savings goals.
There is one major drawback, though, and that's the lockup period. When you purchase a CD, you commit to leaving your money in place for a fixed term. If you need to access those funds early, you'll typically face a penalty, often the forfeiture of several months of interest earned.
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If you want to keep money relatively safe while still earning interest without that kind of restriction, there are alternatives worth considering. These can include Treasury bills, money market accounts and, increasingly, low-risk exchange-traded funds (ETFs).
Each option comes with its own trade-offs in terms of liquidity, yield and risk. Here's what you need to know about low-risk ETFs compared to more traditional cash alternatives, along with a selection of funds that can serve as flexible substitutes for a CD.
Why consider an ETF for your cash management needs?
If your goal is to replicate the safety of a CD without the lock-up period, the traditional alternatives have been money market funds and Treasury bill ladders.
A money market fund is a specialized type of mutual fund that aims to maintain a fixed $1 net asset value per share. Barring extreme events, known as "breaking the buck," their NAV remains stable regardless of day-to-day market movements.
That structure helps insulate investors from volatility and makes them one of the lowest-risk options for holding cash. Although they're not insured like CDs, in practice they're widely viewed as very stable.
That said, they come with some limitations. Because they're mutual funds, all transactions are processed at the end of the trading day. You can't buy or sell intraday.
Some funds may also require minimum investments, and distributions are typically paid out monthly. While liquidity is effectively daily, it is not as flexible as real-time trading.
Treasury bill ladders offer another route. These involve purchasing a series of short-term government securities with staggered maturities, such as 3-month, 6-month and 1-year Treasury bills.
As each security matures, the proceeds can be withdrawn or reinvested into a new position, maintaining a rolling ladder of exposure. The tradeoff is complexity.
Building and maintaining a ladder requires more hands-on management, often through platforms such as TreasuryDirect.gov. That platform has drawn criticism for being clunky and difficult to navigate, which can be a barrier for some investors.
In contrast, a newer category of low-risk ETFs offers a more flexible approach. These funds typically hold high-quality, short-duration fixed-income securities designed to preserve capital and minimize sensitivity to changing interest rates.
While their NAVs aren't fixed at $1 like money market funds, it generally fluctuates within a narrow range, often just a few cents.
They're not backed by deposit insurance, but in practice they still rank among the lowest-risk ETF options available, especially compared to traditional bond funds that carry more duration or credit risk.
The key advantage is liquidity. Unlike money market funds or Treasury ladders, these ETFs trade throughout the day. You can buy and sell shares at any time during market hours, often with tight bid-ask spreads.
That combination of stability, simplicity and intraday flexibility makes low-risk ETFs increasingly popular substitutes for CDs.
How we picked the best low-risk, cash-like ETFs
No ETF is truly as low-risk as a CD. CDs benefit from deposit insurance, which guarantees your principal up to certain limits. ETFs don't have that protection. That said, there are still ways to identify funds that sit at the lowest end of the risk spectrum within the ETF universe.
First, we limited our selection to fixed-income ETFs.
All else equal, equities are higher risk because they sit lower in a company's capital structure. Stockholders are residual claimants, meaning they only get paid after debt holders are satisfied.
Bonds, by contrast, represent contractual obligations. That higher priority in the capital stack, along with defined cash flows, generally makes fixed income more stable.
While it's possible to engineer low-risk profiles using options or hedging strategies, those approaches tend to introduce additional complexity, counterparty risk and higher fees.
Second, within fixed income, we focused on ultra-short duration and very high credit quality.
Specifically, we looked for funds with durations of one year or less. Duration measures sensitivity to interest rates. When rates rise, bond prices fall, and when rates fall, bond prices rise. Keeping duration short helps minimize that volatility.
On the credit side, we targeted holdings rated AA to AAA. While U.S. government debt has been downgraded from AAA to AA, it's still widely considered among the safest borrowers globally.
We also screened for liquidity. Each ETF selected has a 30-day median bid-ask spread of 0.05% or less. This helps ensure that investors are not losing too much value when entering or exiting positions.
Fees directly reduce yield, so we capped expense ratios at 0.15% per year. On a $10,000 investment, that limits fee drag to no more than $15 annually.
Finally, we focused on funds that generate yields close to prevailing short-term interest rates. Most of these ETFs distribute income monthly, and their yields tend to move in line with the federal funds rate, currently 3.50% to 3.75%.
That range effectively represents the baseline, or risk-free rate, that investors should expect when allocating to low-risk, cash-like strategies.
State Street SPDR Bloomberg 1–3 Month T-Bill ETF
- Assets under management: $49.9 billion
- Expense ratio: 0.1353%
- Inception date: May 25, 2007
- Average duration: 0.09 years
- 30-day SEC yield: 3.40%
The State Street SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) is one of the most widely used cash-like ETFs, due in part to its long track record and the scale of State Street's distribution platform.
The strategy is simple and transparent. BIL holds short-term U.S. Treasuries with maturities between one and three months. The portfolio currently consists of 23 holdings, all backed by the U.S. government.
Interest-rate sensitivity is minimal. That keeps price fluctuations extremely small, while still allowing the fund to capture prevailing short-term yields. BIL's 30-day SEC yield sits roughly in line with the current fed funds range after accounting for fees.
Liquidity is another strength. BIL consistently trades about 500,000 shares per day, and its 0.01% median bid-ask spread keeps transaction costs low.
Learn more about BIL at the State Street Investment Management provider site.
iShares 0–3 Month Treasury Bond ETF
- Assets under management: $82.8 billion
- Expense ratio: 0.09%
- Inception date: May 26, 2020
- Average duration: 0.09 years
- 30-day SEC yield: 3.54%
Undercutting BIL on fees is the iShares 0-3 Month Treasury Bond ETF (SGOV), which tracks the ICE 0–3 Month U.S. Treasury Securities Index. In practice, SGOV is very similar to BIL.
Both funds hold ultra-short-term U.S. Treasuries, resulting in nearly identical sensitivity to interest rates. Yields are also comparable, with SGOV's slightly higher 30-day SEC yield reflecting its lower expense ratio.
Where SGOV stands out is liquidity. The ETF recently traded more than 50 million shares, significantly higher than BIL.
Despite that volume, trading costs remain minimal, with a tight 0.01% 30-day median bid-ask spread.
Learn more about SGOV at the iShares provider site.
Global X 1–3 Month T-Bill ETF
- Assets under management: $2.4 billion
- Expense ratio: 0.07%
- Inception date: June 20, 2023
- Average duration: 0.10 years
- 30-day SEC yield: 3.55%
Even cheaper than SGOV is the Global X 1-3 Month T-Bill ETF (CLIP), which tracks the Solactive 1–3 Month U.S. T-Bill Index. While not a typical Global X offering, given the firm's focus on thematic ETFs, CLIP has gained traction as a straightforward cash management tool.
It provides exposure to ultra-short-term U.S. Treasury bills, similar to both BIL and SGOV, but at a slightly lower cost.
The portfolio currently holds 24 Treasury securities. Its 30-day SEC yield narrowly edges out SGOV, largely due to its lower expense ratio.
Like its peers, CLIP distributes income monthly and maintains strong liquidity, with a tight 0.01% 30-day median bid-ask spread.
Learn more about CLIP at the Global X ETFs provider site.
F/m U.S. Treasury 3-Month Bill ETF
- Assets under management: $6.8 billion
- Expense ratio: 0.15%
- Inception date: August 9, 2022
- Average duration: 0.25 years
- 30-day SEC yield: 3.44%
If you want precise exposure to a specific point on the yield curve, broader ETFs like BIL, SGOV and CLIP may not be ideal. Those funds hold a range of maturities. Some investors, however, prefer targeting a single tenor, most commonly the 3-month Treasury bill.
That's where the F/m U.S. Treasury 3-Month Bill ETF (TBIL) comes in. This ETF is designed to replicate a simple strategy many investors already use through TreasuryDirect: buying a 3-month T-bill, holding it to maturity and rolling the proceeds into the next issuance.
TBIL automates that process. At any given time, it holds the latest "on the run" 3-month Treasury bill. When a new one is issued, the fund rolls into it. The result is a very clean and easy-to-understand exposure to short-term government debt.
The trade-off is cost and liquidity. Its expense ratio is higher than peers, which slightly reduces its 30-day SEC yield. Trading costs are still low. But at a 0.02% 30-day median bid-ask spread, it's modestly less liquid than the largest ultra-short Treasury ETFs.
Learn more about TBIL at the F/m Investments provider site.
Vanguard 0–3 Month Treasury Bill ETF
- Assets under management: $5.6 billion
- Expense ratio: 0.06%
- Inception date: February 7, 2025
- Average duration: 0.10 years
- 30-day SEC yield: 3.56%
When credit quality and interest rate sensitivity are effectively the same, the deciding factor often comes down to fees. The 30-day SEC yield is quoted after expenses, so lower costs directly translate into higher take-home income.
In that respect, the Vanguard 0-3 Month Treasury Bill ETF (VBIL) stands out. In classic Vanguard fashion, VBIL undercuts competitors on price while delivering the highest yield in this group.
The ETF tracks the Bloomberg U.S. Treasury Bills 0–3 Month Index, providing the same ultra-short Treasury exposure as its peers with minimal interest rate risk.
Despite its recent launch, VBIL has quickly gathered assets. And the cost advantage doesn't come at the expense of tradability. VBIL maintains strong liquidity, with a tight 0.01% 30-day median bid-ask spread.
Learn more about VBIL at the Vanguard provider site.
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