Investing your money can seem unsettling if you're not sure which route to take. The best investments for beginners will help you get started on the right track. However, even experienced investors may want to consider low-risk investments to protect their principal. A low-risk investment is designed to minimize the chance you lose money. It prioritizes capital preservation.
With volatility up in 2023, it's time to go low with investment risk. However, when considering investment options, you should weigh the potential returns and the risk involved. Here are some of the best safe investment options available today.
First, high-yield savings accounts offer a low-risk investment option with a relatively high return. These accounts offer interest rates above the national average, and they are FDIC-insured up to $250,000 per account. Some of the top high-yield savings accounts include Ally Bank, Marcus by Goldman Sachs, and Synchrony Bank.
Certificates of deposit (CDs) are another low-risk investment option. CDs are time deposits that offer a fixed interest rate for a set period of time. They are FDIC-insured up to $250,000 per account and typically offer higher interest rates than traditional savings accounts. However, you will face a penalty if you withdraw your funds before the maturity date. Some of the top CD options include Discover Bank, Barclays, and Capital One.
Money market funds are a type of mutual fund that invests in short-term, low-risk securities. These funds aim to maintain a stable net asset value of $1 per share and offer higher returns than traditional savings accounts. Money market funds are not FDIC-insured, but they are considered a low-risk investment. Some of the top money market funds include Vanguard Prime Money Market Fund and Fidelity Money Market Fund.
Government bonds are a low-risk investment option that offer a fixed return. These bonds are issued by the federal government and are considered one of the safest investments available. Treasury bonds, notes, and bills are all options for investing in government bonds. While government bonds are not FDIC-insured, they are backed by the full faith and credit of the U.S. government.
Corporate bonds are another low-risk investment option. These bonds are issued by corporations and offer a fixed return. While they are not as safe as government bonds, they are still considered a low-risk investment. Corporate bonds are not FDIC-insured, but they are rated by credit agencies based on the issuer's ability to repay the debt. Some of the top corporate bond options include iShares iBoxx $ Investment Grade Corporate Bond ETF and Vanguard Total Bond Market ETF.
Dividend stocks are a low-risk investment option that offer the potential for long-term growth. These stocks pay out a portion of their profits to shareholders in the form of dividends. While dividend stocks are not FDIC-insured, they are considered a low-risk investment due to the stable income they provide. Some of the top dividend stocks include Johnson & Johnson, Procter & Gamble, and Coca-Cola.
Real estate investment trusts (REITs) are a low-risk investment option that provide exposure to the real estate market. REITs invest in a variety of real estate properties, such as apartments, offices, and shopping centers. These investments are considered low-risk because they provide a stable income stream from the rent paid by tenants. Some of the top REIT options include Vanguard Real Estate ETF and iShares Global REIT ETF.
Finally, annuities are a low-risk investment option that provide a guaranteed income stream in retirement. An annuity is a contract between an individual and an insurance company. The individual makes a lump-sum payment or a series of payments to the insurance company, and in return, the company guarantees a certain level of income for a set period of time. Annuities are not FDIC-insured, but they are considered a low-risk investment because of the guaranteed income they provide.
In conclusion, there are many low-risk investment options available for investors who want to protect their principal. High-yield savings accounts, CDs, money market funds, government bonds, corporate bonds, dividend stocks, REITs, and annuities are all great options to consider. While no investment is completely risk-free, these options provide a great starting point for investors who want to minimize their risk while still making a return.
