Keeping your money idle doesn’t make any sense. If you tend to keep most of the cash in your bank, but don’t want to invest in fruitful schemes, it will never grow. You will not have enough money after you retire, and that might lead to several financial crises. Every investment scheme has some kind of risk, but you should opt for the ones that have comparatively lower chances of failure. This guide will help you in every step to explore the different safe and low-risk investments you should consider.

Opening a bank account

This is the first thing you should do before making an investment. Find the nearest reliable bank branch around your area that provides a reasonable interest rate and visit with the following documents:

  • Your social security number
  • Your identification card, such as passport, driver’s license, etc.
  • Your permanent address or mailing address.
  • The money you want to deposit.

Tell the bank representatives that you want to open a savings account. This will help to make low-risk investments quickly. Different banks have different procedures like taking photocopies of KYC documents, enabling biometrics, and so on. Once you go through all the paperwork and procedures, make your initial deposit. Your bank account will get credit with the respective amount. You are now eligible to invest in some of the popular low-risk investments.

Safe and low-risk investment options

Millions of traders and investors invest in stocks, Forex, and cryptocurrencies. But, these industries are highly volatile. Marketing Director David Muscat Fenech Adami says, “You never know when the market comes crashing down. On the flip side, if the market is going up, you can become a millionaire within a few days. But, it’s more like gambling if you don’t know the tricks of this trade. So, it is better to avoid such ludicrous offers. You should concentrate on some of the safer investment schemes.” They might not provide such massive returns, but there are low risks of losing money too.

The primary thing that you need to consider is preserving your capital. Additionally, your capital should also provide a steady flow of income in the form of interest from the investment scheme. So, without wasting any more time, let’s take a look at some of the low-risk investment options.

1.     Certificates of deposit

When it comes to safe investment options, this one tops the list. Certificates of deposit don’t provide thousands of bucks as interest every month, but the risks are lesser too. That means your initial deposit will remain safe no matter what. Many banks provide certificates of deposits starting from $1000. This investment scheme supports the saying that something is better than nothing. Instead of keeping your money buried in your house, it is best to invest in certificates of deposit.

Make sure you compare the rates offered by different banks before spending. You can also invest in several CDs in various banks to spread the risk. Although the returns are slightly lower than other investment schemes, you can have peace of mind that your money is going nowhere. Many people say that CDs and savings accounts are the same. Well, CDs provide a better interest rate. So, you can transfer your money in your savings account to different certificates of deposits.

FDIC also insures almost $250,000 per account per user. You can invest in various CDs in different banks and also get insurance coverage on them for over $250,000. Since they usually have a fixed rate of interest, you will have an idea about the money you are most likely to receive after the end of the CD period.

2.     Treasury issued securities

These US Government-certified securities include notes and bills, treasury bonds, I Savings Bond, and Series EE/E. They are also some of the safest instruments that you can invest in. However, instead of opening a bank account, you should ideally open an account with the treasury. This eliminates the need to transfer your saving account money to the treasury account after following a string of paperwork.

If this is your first time investing in treasury issued securities, you can start with as low as $25 or $100 on savings bonds or notes and bills. The US government calls this scheme “full faith and credit” because of the low-risk investment options. You can expect an interest similar to certificates of deposits, but sometimes the rates are higher too. So, you should always compare the rates of different treasury bonds, I Savings bond, etc. before investing.

Treasury issued securities are widely popular for their high degree of safety and security. The US government will repay you with a reasonable interest no matter what the economic condition of the country is. You can invest in several of these securities to make sure you get interests from various bonds.

3.     Money market mutual funds

This is a slightly riskier investment model than treasury issued securities and certificates of deposits. However, it is still considered a safer option by investors. The interest rates fluctuate depending on the company’s condition. For example, if you invest in ABC Company’s mutual funds, and its overall market reputation is quite stable now, you are more likely to earn a significant amount of return. On the other hand, if the company’s condition is not quite great, you should hold on to your investments longer.

Money market mutual funds are ideal for short-term investments. Mutual fund companies have analysts, traders, and professional researchers who can help them invest the money they collect from mutual funds to make more cash. The more they earn, the more you make. Many companies also pay dividends to investors as a token of appreciation.

Remember, this is a small-term investment scheme. You will need to keep an eye on the mutual fund company’s interest rate fluctuations all the time. For example, you invest $1000, and according to the mutual fund scheme, you should earn approximately 10% interest. But, since this is a variable rate, you can’t say for sure that you will receive $1100 after one year. In fact, the interest can go higher than 10% too. So, the moment it hits 10% or goes slightly higher, sell your mutual funds.

Investing in reputable companies will reduce the risks of losing money. However, you should study the rate fluctuations of the mutual fund company before investing.

4.     Fixed annuities

This is more like a life insurance policy; only you can enjoy the benefits while you are still alive. A fixed annuity consists of a contract between you and an insurance company. You pay them a certain sum of money, and they will pay you a guaranteed return after a few years. Depending on the contract, you can either pay the money in full or in installments. It is better to pay them as installments so that you don’t block all the cash at one place.

Ideally, you should spread your investments in several of the options mentioned above, receive the interests from these schemes, and use that interest to pay for the installments of fixed annuities. However, once you invest in a fixed annuity, you will not be able to withdraw money during an emergency. Unlike a money market account or even your savings bank account where you have access to cash, this one prevents you from using your money.

But, the advantage of fixed annuities is profound. The interest rate is significantly higher than the other investment options mentioned above. Also, the interests you receive from fixed annuities are tax-deferred. Since the insurance company locks your rate of return, you shouldn’t think of withdrawing money now and then. For example, you invest $2000 on a fixed annuity scheme for 10 years with 8% interest rate. You will receive $3600 at the end of ten years.

5.     Corporate bonds

Like government bonds, companies also issue various bonds that have different interest rates. The ones with high interest come with a higher risk, and the one with low interest has a low risk. Many investors also call low-risk corporate bonds as junk bonds. But, whatever the name is, these low-risk bonds are beneficial for people who don’t have experience in investment schemes. Although the interest rates are significantly lower than the high-risk bonds, you have an assurance that your money is safe.

You should follow the same rule as money market mutual funds while investing in corporate bonds. Go through a list of reputable companies that provide stable returns. You wouldn’t want to invest in corporate bonds that promise higher returns, but don’t meet the expectations because of the volatile market conditions. It is wise to invest in a scheme that lasts for a short period. This will help you understand whether the company is reliable or not.

With so many safe and low-risk investment options available, it is high time you think of using your money in something worthwhile. No one will pay you unless you work hard. But, these investment schemes can. So, invest wisely, and always read the offer documents of the plan carefully before investing.