Best Low Risk Investments
As living costs go up and up, it becomes even more important to invest our money, no matter what the amount is, and when we do, we want to make sure that we produce higher returns while experiencing little risk. It is possible, but if you want very high returns, you will have to take greater risk. If for instance, you are in retirement age, or putting away money for your kid’s college education, then your endurance for risk does drop a great deal. You can’t afford to take any chances in case the market drops.
So, this post will take you through the best low risk investments that will yield you a higher return.
- High Interest Savings
If you want a risk free way to get some interest on your money, you should look into opening a high yield savings account, because this way you’ll be able to earn some amount of interest just for putting your money in a deposit. This also doesn’t require any other maintenance. Many high yield savings accounts offer economical interest rates with no fees, so find a bank with an excellent reputation with effortlessly accessible online managing of your account.
Many investors don’t like the idea of annuities because some unreliable financial advisors suggested and pushed them to people who didn’t suit that in terms of their financial objectives. But it is important to remember that annuities are a fine choice for various investors who wish to steady their portfolio over a longer length of time.
When it comes to annuities, it is important to keep in mind any risks and discuss everything with your financial advisor. Understand the annuity you are signing off on before you do, because annuities are usually complex with many facets in the contract.
When you buy an annuity, you give a lump sum and receive a assured rate of return. There are different kinds of annuities, but regardless, buying one is similar to making any deal with an insurance company. You can either get a fixed or variable return back, or sometimes it will depend entirely on the performance of the stock market and gives you drawback protection.
Your risk will always be lower if you get a guaranteed return back. This way your annuity is backed up by the insurance company that holds it, so it is secure despite the product itself being complex.
- Money Market Funds
These funds are mutual funds that are best suited for those who don’t want to any of the principal on their investment. This fund also tries to make keeping your cash in the fund rewarding and useful and pays out a slight bit of interest. The aim is to keep the net asset value at $1 per share. Sometimes, the net asset value (NAV) can drop below $1 but it doesn’t happen often. These funds have a strong background in protecting your cash value.
- Municipal Bonds
Whenever a governmental body needs to borrow money, they do so in the form of a municipal bond. These bonds are issued by the government and they are an excellent investment for those who wish to evade taxes. Some municipalities also excuse income tax on these bonds, but you should confirm this with your advisor.
These bonds are so secure because they circumvent income taxes and as a result, have a higher return compared to an investment of the same risk level that are taxed, and also there is a low chance of the borrower defaulting. Governments can always elevate taxes or pay off old debt by issuing new debt, which is why municipal bonds are protected investments.
- Preferred Stocks
Preferred stocks are stocks issued by companies, and they have both an equity and debt stock portion. Preferred stocks have less risk than common stocks and are not traded as heavily as common stocks. By purchasing preferred stocks, you can own company shares while still receiving dividend payments.