There are no risk-free investments. The risk is always an element in investing concept: in order to get more money than you have had initially, a certain level of risk should be accepted and “paid” by you as an investor.
Low-risk investments make a good alternative to saving cash due to being a safe way of dealing with money, while investor still earns something. It is fair to say modern business environment offers great investing opportunities with really fat returns with moderate risks.
If you are near your retirement time, low-risk investment is the most reasonable option you can choose as you will need to have your savings intact guaranteed.
First of all, let’s define the term “risk”. The risk is a potential loss of your money in relation to the expected profit/money growth. Depending on your personal risk tolerance and profit appetite, you may consider diversification of your investment portfolio, by adding some high-risk assets into your low-risk basket.
Anyway, we have collected the most popular low-risk ways to invest the money, so you can choose one or few of them to have your money safe.
Corporate bonds are so popular for a reason. Companies and institutions issue bonds as a “promise” to pay to an investor the value of the invested money in the future. Along with actual value bonds are paid off with the certain interest, therefore bonds are an investment tool. Corporate bonds are a reliable, very low-risk way to invest the money for a long run. Bonds are often used as a diversification element in a whole investment portfolio.
Savings accounts are the bank accounts with the interest rate about 0.1 – 0.5%. Therefore, technically, a savings account could be considered as a low-risk investment with a minimum money growth. The interest rate helps protect the money’s value from the devaluation, caused by the yearly inflation rate. Still, usually, the inflation rate in the US is about 1-2% recent years.
These types of papers are issued by insurance companies and promise to an investor a minor, yet reliable and fixed interest rate. Unlike many other investment assets, fixed annuities bring a tax-deferred income. That means you will not pay a tax on the interest rate if you withdraw it until you are 59.5 years old.
Risks are minimal (only in insurance company goes bust), thus, fixed annuities are an excellent way to invest the money which you want to have saved and intact for your future retirement time.
TIPS (Treasury Inflation Protected Securities)
If you have literally zero tolerance to risk, then Treasury Inflation Protected Securities are your safest option.
TIPS are offered in two types: Tips with the fixed annual interest rate which remains unchanged during the whole period of investing. The second type is an inflation-protected TIPS which offer varying interest rate, depending on the current inflation rate. The safety and a paid interest for TIPS are guaranteed by the government.
Certificate of deposits (CD)
Certificate of deposits’ concept is very similar to saving money. It is one of the safest types of investments, where issued certificates have a fixed maturity date and a certain interest rate (unchanged for the whole period). Certificates of deposits may have any denomination.
This type of papers is issued by a bank which makes them the safest investment tool.
Like all other low-risk investing tools, CDs are not of high-liquidity, means you can not exchange it for cash at any time without being charged a penalty fee.
Treasury bills, treasury notes
In short, a treasury bill is a paper, issued and backed by the government. T-Bill offers and investor a guaranteed interest rate along with nearly zero risks. Treasury bills are often used as a part of an investment portfolio in order to diversify the risks (especially, when there are high-risk stocks in a portfolio).
Unlike investing in high-risk and high-yield stocks which value may vary greatly, you have no risks with dividend-paying stocks. You don’t lose and don’t earn on papers price’s fluctuations, but instead, you got paid the higher dividends in case of the stock’s appreciation. Your money is not under the threat during stock’s downtrend. Investing in dividend-paying stocks may start from $1000.
Credit card rewards
In spite of the fact that credit card rewards are not considered as a serious way of investing money, still, as an owner of a credit card, you may receive bonuses (points) from your bank. It’s a low-risk additional income which may become a part of your low-risk investment portfolio.
Cash value live Insurance
Whole life insurance and Universal life insurance are both can be considered as cash value live insurance. As life insurance is paid upon the death of a policyholder, the cash value is transferred to those who receive payment. Therefore this way of investing money is quite controversial in terms of considering it a part of a portfolio, but still, technically, it is an investment, as the cash value of insurance may grow with the time.
Summarizing all above we may say that low-risk investing is chosen by those who are after the saving money rather than making them grow. If you are near your retirement period it’s getting even more important to choose the most reliable way of taking care of your money with guaranteed safety and little income. Having peace of mind and financially secure retirement is everything, while risks may ruin the plans and put your lifestyle, health, and overall wellbeing under unnecessary threat.