7 Best Low Risk Investments for Steady Growth

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The world’s economy is slowing down. Some experts are even starting to talk about recession, while others argue these talks are premature. The inflation has cooled but the interest rates are still high. 

In this high-risk financial situation, it can be tricky for investors to preserve their portfolios. However, investing wisely in low-risk assets can help you leverage your investment portfolio and stay on track.

Low risk investments are a great choice for those who don’t want to lose their money to inflation and are looking to invest short-term. We listed the best low risk investments for different goals and economic situations, which is especially relevant now.

What Are Low Risk Investments?

Any investment that may generate a return also provides at least a slight chance of a loss. By definition, low risk investments are less likely to incur losses. The returns are steady, with barely any volatility. They rarely succumb to unexpected market fluxes. At the same time, low risk investments offer lower returns than high-risk investments.

Some low risk investments you can try include savings accounts, bonds, annuities, and certificates of deposit. These investment options generate a passive income and aren’t a get-rich-quick solution, but they offer you financial security during economic uncertainty. 

Low risk investments are best for short-term because the money is likely to lose purchasing power with time. Inflation can erode this investment and you may end up without any returns in the long-term. For the long-term, you could consider higher risk investments as these are likely to also have a higher return in the long run.

Top Low Risk Investment Options in 2024

Everyone can and should invest, even if you think you don’t think you have enough money to start investing. Low risk investments are a great place to start, and here are some options that you could consider:

1. Money Market Accounts (MMA)

A money market account is an interest-bearing bank or a credit union account. The main difference between a regular savings bank account and an MMA is that the latter pays a higher interest rate and sometimes includes other features such as check-writing and making debit card transactions.

Some of the main MMA features are low fees and high interest rates, which makes it a great choice for generating passive income. Many money-market funds also have Federal Deposit Insurance Corporation (FDIC) insurance that would protect your money in case of a bank failure.

While money market accounts are great for low risk investment, some may find other alternatives more attractive. For example, high-yield or high-interest checking accounts may pay higher rates than money market accounts but also come with more restrictions.

2. Money Market Funds

While the terms sound similar, money market accounts are not the same as money market funds. Money market funds invest in cash, cash equivalent securities, and other high liquidity instruments. This type of investment offers very low risk and the funds are insured by Securities Investor Protection Corporation (SIPC).

Dividends generated by money market funds usually reflect short-term interest rates. Just like most low risk investments, this option is good if you have a sum of money you’d like to invest in the short term.

3. Certificates of Deposit (CDs)

A certificate of deposit (CD) is a kind of savings account. It pays a fixed interest rate on the money held in the account for a set period. This can be 3-, 6-, 12-months or 4-, 5-, or 10-years.

CD’s rates are often higher than those of other savings accounts. However, certificates of deposit accounts don’t have the same flexibility. If you decide to withdraw the money before the agreed-upon term passes, you’ll be charged a fine.

In general, certificates of deposit (CDs) are some of the safest known investment instruments. They have guaranteed fixed rates, meaning what you sign up for is what you’ll ultimately get. They often have protection from the FDIC.

4. High-Yield Savings Accounts

The growth rate of money saved in high-yield savings accounts can be a few times higher than that of traditional savings accounts. Most credit unions and banks offer this type of investment but online banks are often the ones that offer the highest rates.

Those banks that provide high-yield savings accounts frequently have several security measures, including data encryption, multi-factor authentication, NCUA/FDIC insurance, and secure data storage.

The high-yield savings account is an attractive low risk investment opportunity. If you want to get the best deal for your money, compare different banks and their initial deposit requirements, minimum balance requirements, fees, and interest rates.

5. Treasury Bonds and Treasury Bills

Treasury bonds (T-bonds) and treasury bills (T-bills) are interest-bearing bonds. They’re issued by the US Treasury and insured by FDIC. This means that the FDIC will reimburse you for losses if the issuing agency defaults on the bonds. 

Treasury bonds offer low risk and stable income. The interest rate is fixed at auction and doesn’t vary. T-bonds operate like government debt and earn periodic interest (every six months) until maturity, which is 20 or 30 years. You can hold a bond until that time, or sell it before it matures.

If you’re looking for even lower risk investments, look into treasury bills. It’s essentially a short-term loan issued by the government. Contrary to the bonds, treasury bills mature in one year or less. If interest rates go up, T-bonds may see a loss of value, which creates a slightly higher risk compared to T-bills.

6. Fixed and Indexed Annuities

Fixed and indexed annuities offer steady and reliable income. Annuities are a type of insurance investment. It entitles the investor to get a series of annual sums, depending on the annuity type they choose – fixed or indexed. 

In other words, annuities are contracts between a financial or insurance service firm and the investor backed mainly by insurance reserves. They promise to provide a regular income for a stipulated period, which depends on the contract terms.

If you choose a fixed annuity, it will pay a guaranteed interest rate depending on your contributions to the account. Meanwhile, an indexed annuity will pay an interest depending on the market index performance. While indexed annuity products provide greater rewards and higher risks, the fixed annuity option offers lower risks.

This type of low risk investment is often used in retirement and comes with relatively high fees.

7. Corporate Bonds

Corporate bonds are issued by corporations. This way, companies raise money to grow their businesses and cover various financial needs. In return, investors get paid interest at a fixed or variable rate. Corporate bonds have an expiration date and once that day comes, the interest payments stop and the investor gets back their initial investment sum.

US government bonds are seen as a safer alternative compared to corporate bonds. Therefore, the latter usually offers higher interest rates, to make up for the risk. 

Best Low Risk Investments for Different Goals

With so many investment opportunities it may be difficult to choose the best one. Another risk is to pick one option and use it throughout your life. The best way to go is to consider different low risk investments depending on the current economic landscape, your goals, and life situations.

1. For Retirees

Most seniors experience cash flow management problems. Unless a retiree chooses an investment solution with fewer risks, they might lose their life savings unexpectedly. 

An excellent financial retirement plan should include investing your savings into safe investments to broaden your portfolio and earn regular income. Here are a few options you could consider: 

• Precious Metals: Palladium, gold, and silver offer a robust long-term investment, enabling you to retain and grow your money. You could set up an IRA account with a trusted provider and buy your precious metals to save and diversify your portfolio.
• US T-Bonds: The best thing about the bonds is that you’re almost sure to get your investment. The US Government has remained steadfast in paying on its bonds. Government bonds have face value with interests adjusted to current inflation. You might also want to learn how you can save money during inflation.
• Fixed-Indexed Annuity: The income gained from fixed-indexed annuities depends on the stock market performance. However, your principal investment is protected even when the market falls. These annuities offer higher interest rates than fixed annuities and lower risk rates.
• Fixed Annuity: Fixed annuities are the most viable investments for retirees as they guarantee monthly income. With fixed annuities, you deposit money and allow it time to grow while generating a tax-deferred income. 

2. During Economic Recessions

As an investor, you’re forever searching for legal and safe ways to diversify your investment portfolio and earnings. Deciding on which investment to go for during a recession can be challenging. 

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Additionally, these are other low risk securities that will help generate passive income as well as save during a recession: 

• High-Yield Savings Accounts: These savings accounts help you grow your money during economic recessions. You’re almost always good to go if you keep your money in the best high-yield saving accounts that promise high interest rates and optimal security for your investment.
• Certificates of Deposits: These fixed-interest-rate savings accounts are helpful for investors during a recession period. With CDs, you know how much you will get at maturity, and your investment isn’t affected by the economic recession cycles. 
• Reliable Dividend Stocks: Reliable stocks offer a safe way to convert savings into passive income. You get cash payments from the dividend stocks provider as a reward for committing your finances to the business. Many institutions that provide dividend stocks pay you four times a year.

3. For Inflation Protection

We’re all likely to lose some of our investment money to inflation but some investment types are more resilient than others. The safest investment solutions for investors during the inflation period are:

• Treasury Inflation-Protected Securities (TIPS): one of the better deals for investors that want to beat inflation. The US Treasury often modifies the value of TIPS yearly to ensure they stay in line with inflation. For that reason, you are assured of getting better interest payments and appreciation rates. Although TIPS don’t grow a lot, they allow you to preserve the purchasing power of your money.
• Series I Savings Bonds (I Bonds): government-issued security investments allow you to beat inflation while earning value from your investment. I Bonds can preserve the purchasing power of your money. These bonds change interest rates yearly to attune the rates to the current inflation.
• Fixed-Indexed Annuities: another good choice of investment solution that can suit the needs of investors during an inflation period. They guarantee money interest payments and offer security against rising costs.

How to Choose the Right Low Risk Investments for You?

Since every investor has diverse risk tolerance and goals to achieve, it’d be wrong to say that investing can be 100% safe for anyone. However, there are low risk investments suited for every investor depending on their risk tolerance, investment goals, and even age.

For retirees or those about to retire, bonds and annuities are often better bets as they offer lower risk and more rewards. Younger investors willing to take on the high investment risks and enjoy higher rewards will often find mutual funds or stocks as safer alternatives.

If your goal is to get more returns and you can opt-in for riskier investments, then you could consider diversifying your portfolio with investments such as crypto assets, currency trading, or Contract for Difference (CFD) trading. However, it’s often best to try to keep the balance between low risk investments and those with higher risks. 

Even if you’re only interested in low risk investments, make sure your portfolio is diversified as this reduces the overall risks. For example, you can place different investments across asset classes – treasuries, dividend stocks, CDs, and so on. This will help you balance the portfolio.

Maximize Returns with Low Risk Investments

Many investors want the safest investments but are never ready to pay the high price. While few high-reward assets don’t have risks, you can still find good ones that maximize your returns with minimal risk. 

For instance, fixed-indexed annuities and top-tier bonds offer high returns with minimal risks. But it’s essential to understand the terms, risks, and rewards attached to each bond or annuity contract you’re signing up for. 

Corporate, government, and agency bonds are different, although they operate almost the same way. You’ll often find that government bonds are safer and offer better returns than corporate bonds. 

Better yet, to balance the risk and return, consider annuities with fixed interest rates, which are considered to be the most reliable.

Conclusion

There is no one-size-fits-all investment solution for everyone. Still, the many options shown here are time-proven alternatives known to generate a slow but steady passive income that can come in handy during tough economic times. Whichever type of low risk investments you choose, consider your goals and tolerance levels.

Any serious investor in 2024 would be wise in diversifying their portfolio with the benefits of savings accounts, money market accounts, annuities, CDs, and treasury-inflation-protected securities. This further reduces the risks and may generate a higher return than a single low risk investment solution.

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