The Top 16 Best Low Risk Investments With The Highest Returns:
But despite this fact, there are still good investment opportunities available. The trick is knowing how to separate the ones that are low risk and high return from the ones that are just high risk and even higher return.
I’ve done all the work for you by researching low risk investments for nearly 100 hours, reading over 40 different investment books, using mathematical models of success, and analyzing every single one of the top 99 scams to ever hit the internet.
All of these strategies are proven to provide a near certain rate of return. Plus, all of them are incredibly low risk as well.
There is also a workbook that will walk you through every strategy. This gives you the tools you need to take action and start making money right away.
It’s your one-step guide to taking your financial future into your own hands.
Take the information in this book and put it towards a personal investment portfolio that works for you.
My Favorite Low-Risk Investment Right Now
LendingClub – Peer-to-peer Lending
If you’re looking for alternative investment opportunities, peer-to-peer lending may be the answer. The concept is very simple – Loan amounts are smaller, and there are many investors and borrowers. There’s no bank involved, just thousands of people using the Internet to make money.
Zopa is a peer-to-peer lending platform that started in 2005 in the UK. It currently has more than 1 million users.
To get access to this deal, fill out the application and they will send you a free welcome package. It’s a no-obligation offer.
Investments that require zero risk-taking
If there are any, please let me know! I’m totally open to suggestions.
My first instinct was to immediately say no. It’s challenging enough to find safe investments at low risk, and quite frankly, the whole point of investing is that you expose yourself to some sort of risk-taking in order to potentially reap larger returns than what you’d get in a savings account. Very low risk and very low return usually go hand-in-hand.
So then, what do you do when you have a chunk of money available for investment, but you’re not sure about the equity market? Depending on your age and other factors, you may be content with a conservative investment strategy and want to avoid the stock market entirely. Or maybe a calmer market will help you sleep at night as you make your decision, or give you more time to learn more about investing. Or, you might just be a conservative investor by nature and you’re willing to accept slightly lower returns in exchange for a low-risk investment.
What’s a good example of a low-risk investment with the potential for at least some return?
Grab a Bank Bonus
Find Out How
How do most people make money these days? They work hard. They get a job. They do their job well for a couple of years in order to get a nice raise, and then they use that raise to build wealth.
It’s definitely a tried and true method, but there is then for most people ever amount of wealth. They work hard, they get raises, they retire.
What if there was a way to make money without working, or at least entirely from investments?
This may seem impossible, but it isn’t. In fact, Warren Buffett made the bulk of his fortune this way. He used his knowledge of investing to spot investments that put money in his pocket every year without him lifting a finger.
It’s not easy. It involves a lot of risk. But it is possible, and it can build wealth.
The next few steps will walk you through the process.
Find a good bank.
Different banks offer different types of investments. Some have great rates on savings accounts while others have great investment options that will put money into your account even if stock market levels fall.
Trade Up To A High Interest Savings Account
Interest rates remain extremely low; as low as 0.01% on a 5 Year CD, 0.08% on a 1 Year CD, 0.19% on a 3 Month CD, 0.25% on a 1 Month CD, 0.99% on an Internet Savings Account, and 0.12% on a Money Market Account.
You may be tempted to think that saving in a high yield bank account or certificate of deposit (CD) is a better deal than a savings account, but you’d be wrong. Even if you do eventually get up to a 5% on a 5 Year CD or a 1 Year CD, that interest wouldn’t be taxed. Based on current tax rates, we can’t see any benefit of putting money in a CD or account with low interest. The total interest is taxable.
The best low risk investment we can find that is liquid, has a 1% higher APY, and is tax deferred is the CIT Bank Money Market Account.
A New Economy has emerged from the Great Recession, and saving money is not a priority. Simply looking at the stats below, you see that a New Economy doesn’t really excite to save money.
Open An Online Checking Account
If you’re looking for a simple, low risk, and relatively safe investment, your checking account is a solid option. Although your money is FDIC insured, it’s not a fixed rate of return like a CD. Your earnings will simply be the interest payment you receive weekly or monthly as part of your account. You can access that check with no minimum balance and no monthly fees.
In other words, you have little to lose by opening up a checking account, especially if you already have a bank account. Plus, your money is in the bank, ready to be used in the event of an emergency.
This same strategy can work for your savings account, although most savings accounts don’t pay interest.
Earn More Credit Card Rewards
There are a lot of best credit cards for travel out there, including airline miles cards (which let you book flights easily), hotel cards (which let you book hotel stays easily), and cash back cards (which let you use cash back to pay off the balance at the end of the month).
Best Low Risk Investment Options
Investing in low risk investments is one of the most difficult things to determine when you lack the proper inputs. A lot of times finance experts can only provide anecdotal evidence and their own experience when recommending low risk investments.
Investing in our 401k’s is one of the biggest returns on investments that we can make. The major risk to most people is lock-in. However, there are a lot of options that allow you to take your money out without penalty.
Of course these investments will still fluctuate in value. But if done correctly, they can provide a financial safety net for retirement and more.
Certificate of Deposit
When it comes to investing, most people think of the stock market. Investing in a stock, however, can be risky. For example, you may buy company stock when the company is doing poorly. Then the company starts turning around, and all of a sudden you’ve got a winner on your hands. Then, if the stock value gets too high, you may choose to sell your company stock and move on to another company. On the flip side, if the company is doing badly you may lose the money you invested.
Certificates of deposit (CD¹s) are also a type of investment. With the market¹s current fluctuations it may seem like the best time to put some money into the market, but certificates of deposit may be a better choice for your financial security in the long run.
Investing is a great way to keep your money working for you and in some cases even earning you more money. CDs are the most secure investment you can make because they are FDIC insured. This means that if the bank goes under, you get your money back. It’s a low-risk investment.
Money Market Account
Since money market accounts have such low yields, you don’t see many people talking about them in relation to investment opportunities. However, I’ve found money market accounts to be a great place to park money that I don’t need around, and I don’t want to have to worry about.
Money Market funds invest in very safe investment portfolios and provide high liquidity. Liquidity means you can always withdraw your money when you need it without any penalty fees. Money Market funds are not FDIC insured. However, they are considered one of the safest investments you can make. Interest rates are currently at 0.
Treasury Inflation Protected Securities (TIPS)
The stocks that we have recommended that are traded on the U.S. stock market are highly volatile, making it necessary for investors to hedge their bets against unwanted volatility.
That's where Treasury Inflation Protected Securities come in handy.
The gains from Treasury Inflation Protected Securities are protected from inflation whereas the gains from stocks are not.
TIPS are government securities. It is similar to a regular bond except it adjusts the interest rate payments to reflect inflation changes.
The payout from a TIPS is the sum of the monthly interest payment and the annual inflation adjustment to the principal.
Some TIPS do have some inflation protection built in for the initial years, but what makes bonds issued after January 3, 2012 stand out from the rest is that these bonds have real inflation protection every year.
The key is to buy a TIPS bond with a longer maturity. TIPS with a long maturity should provide a higher rate of return in 30 years when compared to a shorter maturity TIPS bond11.
We recommend the iShares Barclays TIPS Bond Fund to our readers.
US Savings Bonds
Annuities are the most low-risk investment anyone can make. They are tailor made for someone with a low appetite for risk while maximizing safety of their capital.
An annuity’s return is based on vesting over a period of time. The average Vesting time is six years. The most common Vesting Time is five years. This means that you keep five percent of your capital every year. Most annuities charge a very tiny fee to do this. By way of comparison, Term Life Insurance costs roughly twice the amount per year.
You may ask, “What happens if I need my money before the six years?” This is a great question and one that must be addressed. If you need to access the money prior to the end of the vesting period, most term investments would likely put you in a position where you would lose more than 50% of your investment.
Annuities give you complete flexibility in accessing the money. You can access the money at any time and for any reason with minimal adverse tax consequences.
It is very important to read the terms and conditions thoroughly when purchasing an annuity. Some annuities carry penalties that can eat into your returns.
Cash Value Life Insurance
The popularity of cash value life insurance has increased over the past few years as people have become more aware of the benefits of lump sums. Cash value life insurance is a type of universal life insurance that accumulates cash value in a separate account. This account can be accessed by surrendering the policy and the cash value or by borrowing against the cash value. This is similar to a savings account because the interest earned in the cash value account is not subject to income tax.
Many people use the cash value from this account to evaluate and decide whether to surrender the policy for a lump sum or to borrow money from it. Many lenders have started to offer products based on the value of cash value life insurance policies.
Medium Risk Investment Options
While there are several safe long term investment options out there, let’s face it, most of them come with a minimal return. For example, a five year CD that’s guaranteed to give you back only about 1.5% is not going to give you a lot of wiggle room if you need to withdraw the money prior to maturity.
Here are some medium risk investment options that provide a little bit higher return without sacrificing safety.
Real Estate: Investing in real estate is one of the most tried and true methods of passive wealth building. It’s also a very popular investment because it’s a hands-on way to build wealth without directly trading your time for it.
Investing in real estate is a classic example of a medium risk investment. You can build a limited liability company around the property you own.’ Additionally, you can buy properties with many different risk profiles. The least risky would include apartments that you plan to live in for at least a year then either rent to a tenant or sell. Low-risk investments include duplexes, townhouses, and single family homes.
Crowdfunded Real Estate Investing
What we are suggesting here is Crowdfunded Real Estate. So what exactly does that mean? It means that you go off and do your research into the areas you might like to make an investment, and then leave the rest to someone else to manage.
Dividend Paying Stocks and ETFs
Many retirement investors are looking for a safe passive source of income to supplement their Social Security and personal savings. Not surprisingly one of the most popular choices is dividend paying stocks or exchange traded funds. The concept is fairly simple. The investor puts up money to purchase a dividend paying stock or ETF, and in return the investor receives a guaranteed cash flow every quarter, month or year. Each payout will be different based on a variety of factors such as the price of stock at the time of purchase, the company’s financial performance, and the tax implications of the distribution.
Across the globe the official definition of a “low risk” investment is pretty much the same. It would have to be relatively safe and would have to be fairly low risk in relation to the amount of gain it would make.
A low risk investment has a lot of upsides in the financial sphere. Making a low risk investment means that your money is safeguarded against any significant loss. You can easily provide for your future, put together a nest egg and take care of your family without having to worry so much about losing the money you have put aside for a rainy day.
If you are already investing and are looking to make more gains, chances are you should be looking at low risk investments. Making this change to your portfolio can help you grow your money more significantly. You just have to find the right investment. Below, we are going to explore some of the best low risk investments you can find.
At a federal, state and local level, governments are the largest borrowers in the world. Municipal bonds are debt instruments that are backed by a stated promise of repayment from a state, city, county or country. These financial instruments are not backed by the full faith and credit of the United States government. However, they are backed by the faith and credit of the municipality that issued the bond. Generally, the bonds are taxable. Interest payments also vary in that interest earned by investors is not federally tax free like that of US government securities. If you invest responsibly, you can save over the long term with municipal bonds.
Preferred stocks offer a steady rate of dividends and you receive first dibs on the company’s liquidation assets. The risk here is minimal since the stock price is not volatile and preferred stock is backed by its own cash flow. The only real risk is the stock getting cut because investors want to get paid back before the next dividend. The preferred stock will still need to pay off its holders though (known as “redemption”). So it could take years to be fully vested in all preferred stock.
The downside is that investors will not gain as much in dividends as common stocks. The upside is that the investor is paid to wait for the common stock to gain value.
If you’re a growth investor and want to get some interest on your investment, then this is the way to go. You can also hold the preferred stock as a long term investment and wait for it to be sold to common stock. Once that’s done, the investor can then redeem the preferred shares for the common shares and gain a large share in the company.
There are, of course, preferred stocks that are more risky than others. It really comes down to the company and if you feel comfortable taking that risk with one of your investments.
The Bottom Line
In the spirit of crystal ball gazing, here are 10 stocks that we think will do well over the next five years.
We were inspired by Warren Buffett’s predictions of what will happen in the stock market in the next five to ten years. Buffett is a pretty smart guy and has a very successful track record, so let’s examine his picks to see how we fare.
Berkshire Hathaway’s Chairman and CEO Warren Buffett is currently 76 years old. So he and his lieutenants have him just under another decade to use his stock selection acumen to pick stocks that will be profitable over the next 10 years.
I like the idea of putting one’s money on the line. Buffett’s picks are not a secret because he publishes the annual letter of Berkshire Hathaway every year. So let’s see how Buffett’s picks from 2005 did over a 10-year period – the predictions he made in his 2007 letter and how they did compared to the S&P 500.
About the Author
Jason Fieber, Contributing Writer.
Investing and finance have always been my biggest passion, and it’s still an ongoing goal to get there full time. It’s hard to break into this niche right away, so I’ve been building some financial websites on the side, which I’ll list out below.
Outside of investing, I enjoy playing guitar, riding BMX bikes, and playing hockey.
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Market Indicators to Get Fundamentals
There are several different types of investments out there. They range from cash accounts and bonds to real estate, stocks and commodities. But which of these provide the most bang for your dollar?
We’ve compiled a list of investments that are widely considered to be low risk. This means you won’t lose your shirt if there is a pullback in your market or a global crisis. All of these investments carry a degree of risk; however, we’ve found these options to be the least volatile.