With cash and bond yields at their highest levels in over 15 years, many investors wonder if they should favor these higher-yielding options over stocks.

Here are answers to some questions investors might have about how to approach asset allocation in an era of 5% CD yields.

The yields on cash products are compelling today, and cash investors do not have the potential for principal volatility. That’s particularly appealing because we’ve seen losses for some bond investors over the past few years and so far in 2026. Additionally, our annual diversification research has shown that cash is a solid diversifier for equities, on par with bonds.

But cash yields are fleeting: Cash investments are short-term loans to various entities. If interest rates drift down, the high yields may disappear as higher interest rate loans are retired. If you lock in a longer-term CD, you can benefit from that high yield longer. But if you’re in a money market mutual fund or high-yield savings account, your yield will fluctuate based on the prevailing interest rate environment.

Another consideration is inflation risk. Over very long periods, cash yields sometimes beat inflation, but not always. That risk is top of mind for investors as we’ve had above-average inflation recently. Because your long-term yield and return from cash typically will be lower than it is from bonds, inflation will take a bigger bite out of your payout.

Bonds have some key advantages over cash for intermediate time horizons. First, you lock in the interest rate for longer.

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