It’s pretty obvious that when we invest hard-earned dollars, we want to make high returns while enduring little risk. In terms of returns, there are better low-risk investments than others, but it is definitely still true that the higher return we want, the more risk we will have to accept.
When it comes to investing with a low appetite for risk, we will face a wide display of options, and it can be confusing trying to figure out which is best. Here are some the best low-risk investment options that let you earn a respectable return with almost no risk at all.
Peer-to-peer lending is a completely different type of investment. It is also one of the highly recommended short-term investments as well.
Instead of buying shares in a company (and its future profits) you are lending your money to someone else with the hope they will pay you back. If you screen your loans poorly, peer to peer lending can be extremely risky. However, screening properly and choosing only the best-rated loans is a great way to secure a decent return with less risk on your part.
High-Interest Savings Accounts
If you’re looking for a risk-free way to earn some interest on your money, a high yield savings account might be your answer. With these accounts, you’ll earn a nominal amount of interest just for keeping your money on deposit. Other than opening your account and depositing your money, this strategy requires almost no effort on your part, as well.
See Also: Common Types of Investment Accounts
Credit Card Rewards
The idea that credit card rewards could provide a low-risk return on your money might sound outrageous, but it’s not that strange when you really think about it. By picking up a cash back credit card, you earn “points” that translate into real money. And in reality, the “rewards” you earn with some of the top cards are far more lucrative.
Certificate of Deposit
No matter how you look, you’re not going to find an investment more boring than a certificate of deposit. If you’re in the market for one of these low-risk investment vehicles, you can get one through your bank, credit union, or even through your investment broker.
With a Certificate of Deposit (CD), you deposit your money for a specific length of time in exchange for a guaranteed return on your money no matter what happens to the interest rates during that time period.
Annuities are a point of contention for some investors because shady financial advisors have over-promoted them to individuals where the annuity wasn’t the right product for their financial goals. They don’t have to be scary things; annuities can be a good option for certain investors who need help stabilizing their portfolio over a long period of time.
If you’re in the market for an annuity, however, be aware of the risks and talk with a good financial advisor first. Annuities are complex financial instruments with lots of catches built into the contract. Before you sign on the dotted line, it’s important to understand your annuity inside and out.
Money Market Funds
A money market fund is a mutual fund created for people who don’t want to lose any of the principal of their investment. The fund also tries to pay out a little bit of interest as well to make parking your cash with the fund worthwhile. The fund’s goal is to maintain a Net Asset Value (NAV) of $1 per share.
These funds aren’t guaranteed, but they do come with a strong pedigree in protecting the underlying value of your cash. It is possible for the NAV to drop below $1, but it is rare.
Online Checking Account
Just like high yield savings accounts, online checking accounts let you earn small amounts of interest on the money you deposit. If you’re going to park your money in the bank anyway, you could surely appreciate earning some interest along the way. Best of all, many online checking accounts charge zero or minimal fees to get started.
It’s important to reduce your risk as much as possible as you don’t want to start losing capital this late in the game. Since you have many years of retirement ahead of you, you want to preserve your cash.
The best low-risk investments can help you do just that. By letting you earn nominal amounts of interest on your money with little risk, you can help you keep up with inflation without losing. Just remember to read the fine print and educate yourself along the way.
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