For an investor who is not ready to take risks, there are many smart ways to invest money. Even the most ideal investments come with a small risk level. When exploring the safest way to spend money with the least risks, it is vital to have a balanced view of rewards and risks because investments which are seen to have lesser chances offer minimum returns.
What does investment mean?
According to experts, investment means putting your money on a project over a given period. The funds will be expected to bring in returns (known as profit) over such time.
What to invest in
There are lots of projects you can spend your money in at the moment. However, each of them varies in terms of returns and risk. The ones with the highest level of risk usually have very high returns. Some of what you can invest in today are stocks, bonds, shares, Forex, and cryptocurrency.
Where to invest your money
This is what this post will focus on as it shows you some of the ten smartest low-risk ways to invest money. You need to keep in mind. That investment can dissipate in any way, for example, the downward trend in the value of investment or purchasing power. In this article, you can find out the safest way to invest your money and face risks at the same time.
1 The Certificate Deposit (CD)
CDs are described as time deposits as they allow you to access the best way to invest money for a specific period during which a constant rate of interest will be paid. However, you need to understand that given Certificate deposits vary from time to time. The Federal Deposit Insurance Corporation (FDIC) insures all Certificate Deposit (CD) banks to a tune of USD 250,000. Certificate Deposit (CDs) is considered as the smart way to invest money for those who wish to keep their investment amount for a specified period. Note that as much as you will enjoy higher rates of interest than normal savings accounts, you will not get away without a penalty for emergency withdrawal before the maturity of your Certificate Deposit.
2 Government Securities (Treasury Bills)
Government securities mature in the United States within one year and are usually priced through public auctions. Having full credit and faith to the US government, it makes treasury bills the safest way to invest money since the government would not hesitate to borrow to meet its obligations. Government securities are the best way to invest money for shrewd investors who want to invest for a short period but are looking for higher returns. Another advantage of treasury bills is that they are tax-free from both local and state tax income as such high-tax investors find it highly appealing.
3 Federal Government Treasury Bonds
Provided by the federal government, maturing in at least 30 years and a constant rate of interest is paid every six months throughout the bond duration. A federal government treasury bond is another safe way to invest money because the interest you earn will not be subjected to any taxation as it enjoys both the credit and full faith in the US government. Although secure, there is still some interest rate risk on Treasury Bonds due to lower bond prices resulting from higher interest rates. These kinds of bonds are also at risk of inflation, like any other fixed-income investments which may cause the investments to lose its purchasing power over time.
4 Treasury Inflation Protected Securities (TIPS)
TIPS are investments by the governments whose returns are determined by inflation. Usually issued in ranging terms minimum five years, ten years and a maximum 30 years duration, they return a constant rate of interest two times every year. Though there are regular falls and rises of the principal as per the rate of inflation, TIPS is also a smart way to invest money. Like other governments, securities TIPS enjoy the credit and full faith of the sitting government.
5 Accounts for Money Market
These accounts look the same to savings accounts, and the risk level is also the same since they both get a maximum of USD 250,000 federal deposit insurance (FDIC) and almost similar rates. The main contrast between accounts for money market and savings account is typically the method of money access. Savings accounts do not provide an option for check writing like for the money market accounts, and withdrawal is limited to 6 times in a month by the federal law.
6 Fixed Insurance Policies
Fixed insurance policies are the promise of insurance companies to pay a constant interest for a fixed period. The growth of the policy does not incur any tax until maturity; therefore, it is seen as the best way to invest money. Some fixed insurance policies assure you payments for your entire life, providing you an opportunity not to exceed your funds.
7 Bank Savings Account
Bank savings accounts are the smartest ways to invest money if you need to accumulate without necessarily accessing it often. You will get six chances to withdraw every month without penalty. The only obvious limitation of the bank savings accounts is mainly their meager rate of interest. Various banks offer different rates, why not discover that by searching online and go to the bank which has the best offer?
8 Municipal Bonds
Another smart way to invest money is to support the various local and state entities and to buy the municipal bonds issued. Mainly because these kinds of bonds enjoy exemption of both federal and state tax for people residing in the respective states that issue the bonds. Although these bonds are convenient for high –level investors, they are underwritten and rated AAA, providing some virtual protection. As such, they are the smartest low-risk ways to invest money.
9 Savings Bond for the US
Suitable for new or young investors, helping them learn the strides of investment and allowing them to see their investment get returns. Savings bond for the US offers the safest way to invest the money as one can purchase either Series I or Series EE bonds. However, you are likely not to benefit from your three months recently earned interest in case your savings bond is cashed within five years of purchase.
10 Standard & Poor 500 Index Fund
If your investment is meant for a long time, the Standard & Poor 500 index carries minimal risk than you have ever thought. Although it is affected by volatility for short-term, the Standard & Poor 500 Index (S&P Index) for the past 20 years, no investor has lost his money. Generally, the stock index offers high returns in the long term as compared to other investments discussed here.