With interest rates paid on bank deposits and money-market mutual funds dragging bottom, ultraconservative investors are asking where they can get more bang for their buck.

The tales are sad. Reader M.S. of Moraga has $50,000 in T-bills, getting a return of 0.07 percent. Reader C.B. of Oakland holds 50 percent of his portfolio in T-bills, earning that same 0.07 percent and 25 percent in bank deposits paying less than 2 percent. Reader H.H. of Piedmont has about $15,000 in a bank account paying less than 1 percent. Reader T.L. of El Cerrito has a certificate of deposit maturing soon and is looking for a higher yield.

They are among the unintended victims of rock-bottom interest rates, set by the Federal Reserve in its struggle to bring the recession under control. The only good news is that the rate of inflation is virtually zero, so their returns are inflation proof — at least for now.

What should they do?

If I can't convince them to flee super-safe investments like banks and money funds, they might be able to get higher yields in those venues by going online to rate-trackers like www.mybanktracker.com, www.bankrate.com, www.money-rates.com, www.bankfox.com. or www.imoneynet.com.

But the list of yields put together by these trackers

may not include a bank account or money fund with greater return than what they are getting now. Also, those lists include many banks that operate online. They are easy to deal with once the saver gets a handle on the rules. However, many conservative investors don't have Internet access via a computer.

So. I'm suggesting that these investors take a quantum leap into the bond market and/or the stock market, where they can find yields ranging from 4.5 percent and up, without taking too much added risk.

In the bond market, look at Vanguard GNMA Fund and Tennessee Valley Authority bonds, both backed by the U.S. government.

Vanguard GNMA Fund carries mortgage-backed bonds of the Government National Mortgage Association, popularly called Ginnie Mae, which should not be confused with its more notorious siblings, Freddie Mac and Fannie Mae. Ginnie Mae, which guarantees loans to low-income buyers and veterans, is backed by the full faith and credit of the U.S. government.

It costs $3,000 to get into Vanguard GMNA Fund and its current annual yield is 3.24 percent, which could rise as interest rates rise. Interest paid as frequently as monthly. Other Ginnie Mae funds are in business but Vanguard's carries the lowest expense ratio at 0.23 percent. Call 1-800-662-2739 for more information or to purchase shares. Also, check it out further by entering its trading symbol, VFIIX in the appropriate box at fiannce.yahoo.com.

Two issues of TVA bonds are dressed up like stocks and trade on the New York Stock Exchange, which makes it easier for investors to purchase and track. Their trading symbols are TVC and TVE. They run around $25 to $26 a share and their interest rates are between 4 and 5 percent.

Much confusion can arise concerning TVA bonds. The buyer may find them listed as TVC parrs or TVE parrs. Parrs stand for putable automatic reset series, which means that the bond can be ``put back'' to once a year at $25 share, no matter what the investor paid, if TVA lowers the interest rate. The put-back dates are small windows in May and June.

Two stocks that bank refugees might consider are telecoms, namely AT&T and Verizon Communications. AT&T (symbol T on the NYSE) was recently priced at $26 a share for a dividend yield of 6.3 percent, and Verizon Communications (VZ on the NYSE) recently traded at $29 a share for a dividend yield of 6.6 percent.

It's best to buy 100 shares of a stock, meaning putting at least $2,600 into AT&T and $2,900 into Verizon Communications. Buying 100 shares, called a round lot, bolsters dividend income, keeps the portfolio orderly and allows the investor to immediately eyeball the exact monetary increase or decrease in the value of a stock. If a stock rises $1 you immediately know you have gained $100.

Of course, there are risks in the stock and bond market. A stock or bond, unlike a bank CD, can drop (or increase) in value on any given trading day. It's best not to be obsessed with price changes and collect those dividends. Any company could in any quarter cut its dividend, but telecom stocks are less likely to do that, primarily because they know that conservative investors hold those highly stable and highly recognizable stocks for their dividend income.

Vanguard GMNA can be bought directly from Vanguard, but the TVA bonds and the two stocks would have to be purchased through a stockbroker. One suggestion is Scottrade, a discounter that charges only $7 for any size purchase.

Instead of a bank, a saver might be better off in a credit union. More on credit unions in a future column.

Cliff Pletschet's Personal Finance column appears Saturday and Sunday. Send general-interest questions to him at P.O. Box 28147, Oakland, CA 94604 or e-mail him at cliffpletschet@sbcglobal.net. Give your name, city and the question in brief form. To subscribe to his quarterly newsletter, Investment Educator, send $20, made out to Personal Investment Education, to the above address. Subscription information: (510) 531-5620. Also, visit our Web site, www.investment-educator.com