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From the stock market to real estate investing, there are multiple ways to grow your money and meet your financial goals. That said, no matter the type of investment, there’s always a risk that comes with it.
Real estate is generally considered a more stable, long-term investment with lower volatility than stocks, but it is not inherently a “low-risk” investment. The actual risk level is highly dependent on the type of investment, location, market conditions, and management.
Especially, whenever there’s been high inflation and talk of a recession, many people have looked for ways to keep their hard-earned cash. Fortunately, there are low-risk, or “safer,” investment options that can help keep you afloat in a volatile market.
While low-risk investments may not deliver high returns, they help balance and diversify your portfolio for a better overall return, which is a good idea if you have early retirement in mind.
To safely grow your money with low risk, consider financial products that prioritize the preservation of your principal while offering modest returns.
Key options include high-yield savings accounts, Certificates of Deposit (CDs), and U.S. Treasury securities, all of which offer a high degree of safety and are suitable for conservative investors.
Top Low-Risk Investment Options:
| Investment Type | Key Feature | Risk Profile | Best For |
|---|---|---|---|
| High-Yield Savings Accounts (HYSAs) | FDIC-insured and highly liquid. | Very Low (Inflation risk) | Emergency funds and short-term savings goals. |
| Certificates of Deposit (CDs) | Fixed interest rate for a specific term (e.g., 6 months to 5 years). | Very Low (Penalty for early withdrawal) | Guaranteed returns for money needed at a specific future date. |
| U.S. Treasury Securities | Backed by the full faith and credit of the U.S. government. | Very Low (Interest rate risk if sold before maturity) | Conservative investors seeking safety and potential state-level tax benefits on interest. |
| Money Market Accounts/Funds | Earns competitive interest and offers check-writing/debit access (accounts are FDIC-insured, funds are not). | Low | Access to cash with potentially higher yields than traditional savings. |
| Short-Term Bond Funds | Diversified exposure to high-quality government and corporate bonds with short maturities. | Low (Market value can fluctuate) | Moderate liquidity and low volatility for slightly higher yields than cash. |
| Fixed Annuities | An insurance contract that guarantees a set interest rate or fixed income stream. | Low (Illiquidity/penalties for early exit; guarantees depend on the insurer’s financial strength) | Long-term savers or retirees seeking predictable income. |
| Dividend-Paying Blue Chip Stocks | Stocks from large, stable companies with a history of paying dividends. | Moderate (Market risk still applies) | Investors comfortable with some market exposure seeking steady income and long-term appreciation. |
Important Considerations:
FDIC Insurance: Deposit accounts like HYSAs, CDs, and Money Market Accounts at insured banks are government-insured up to $250,000 per depositor, per institution, ensuring the safety of your principal.
Inflation Risk: While the options above protect your principal from loss, their returns may not always outpace inflation, which can erode your purchasing power over time.
Liquidity vs. Yield: Generally, the more liquid an investment (easier to access your cash), the lower the yield. CDs, for instance, typically offer higher rates than savings accounts in exchange for locking up your money for a fixed term.
Diversification: Even within low-risk options, diversification (spreading your money across different types of investments) can help balance yield, accessibility, and safety.
Tax Implications: Interest from U.S. Treasuries is often exempt from state and local taxes, a feature that may be attractive to some investors.
Before making an investment decision, it is important to align your choice with your specific financial goals, time horizon, and personal risk tolerance.
More information on federal insurance can be found on the official FDIC.gov website.
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-Benjamin Franklin
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