When it comes to investing, there are a few low to no-risk investments you can make if your risk tolerance is low or you don’t have a lot of wiggle room to lose if your investment dives. While it is suggested that you set aside funds to make some higher-risk investments if you can, the low-risk, low return investor still has the opportunity to make some investment profit. Here are six low to no-risk investments you can make today.
High-Yield Savings Account
Some may say that a savings account is not an investment, but if anything, you put your money into yields more than what you put in originally. It is an investment. This type of investment will take some shopping to find the highest yielding savings accounts. There are regular savings accounts in your banking institution that sometimes gain interest, or you can invest in a money market savings account, which often yields a higher interest rate.
The money market savings account generally offers a higher interest rate; however, there are a few differences between money market savings accounts and regular savings accounts. The minimum amount put in initially is generally much higher than a regular savings account, which often doesn’t have a minimum deposit. Also, money market accounts are accessible but not as easily as a regular savings account.
Certificates of Deposit (CDs)
Certificates of Deposit offer a set interest rate over a specified timeframe. CDs are a get it and forget it an investment. As long as you don’t cash them in before the specified time, there is no loss. If you cash them in early, some penalties will likely lose you the interest you gained.
These are not as high yielding as a money market account; however, money market accounts require a large initial deposit and maintained balance than the initial cost. As long as you don’t cash them in early, CDs are virtually zero risks.
Money Market Funds
Money market funds are not to be confused with a money market savings account. Money market funds are a diversified or mutual fund the pools bonds, low-risk investments, and CDs and can be bought through mutual fund companies and brokerage firms. These funds can generally be withdrawn at any time without penalty making them more flexible than CDs.
Treasury Bills, Notes, and Bonds
These Treasuries differ in their length of time it takes them to mature:
- Treasury bills mature in one year or less
- Treasury notes mature in 1 year up to 10 years
- Treasury bonds mature from 10 years to 30 years
Treasuries carry no risk if you do not cash out before the maturity date, and because the values change depending on current interest rates, you would lose some if you cashed out during a downturn on interest. Treasury bills, notes, and bonds should be carefully researched before purchasing to ensure you get the best possible rate.
Corporate Bonds
There are bonds that corporations offer called “junk bonds” that are fairly low risk. Like other bonds, the risk lies in the fact that interest rates fluctuate, making these bonds fluctuate. However, you buy fairly short-term maturing bonds. You are less likely to incur the risks of the interest rate fluctuations than if you purchase long-term maturing bonds. You can also lessen risks by purchasing bonds from well-known and stable companies. Bondholders have a higher stake than stockholders because of the equity aspect of the investment.
Dividend Stocks
Dividend stocks are stocks that pay a share of the profits for the length of the ownership of the stocks. They differ from high-growth stocks, which the only payout when the stocks are sold. Dividend stocks will fluctuate with the company’s profits but are much lower risk than high-growth stocks affected by fluctuations in the stock market. Dividend stocks can still be affected by the fluctuations in the stock market, but they are far less affected by the market’s downturns.
Preferred stock
Preferred stock is similar to a low-grade bond rather than a traditional stock. The preferred stock is another investment that will fluctuate with the stock market. This type of stock generally makes a regular cash payout and can be suspended if there are certain circumstances but will make up the suspended payments once the issues are resolved. Preferred stock is a little bit riskier than a bond but is less risky than high-growth stocks.
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