Do you have money from savings, a windfall, inheritance or bonus and want to invest it somewhere but don’t want the high risk of stock market trading? There are investment opportunities everywhere. Can you make sense of them all and identify which ones are the safest, most reliable investments with the least risk and the highest return?
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Does risk-free investment actually exist?
We’ve picked out some of the least risky investments you can find, but firstly, let’s say that there are no 100 percent risk-free investment opportunities that don’t come with a long list of fine print similar to what you’d find stamped on the inside label of a pharmaceutical bottle. There are, however, investments that offer certain guarantees and are straightforward enough to allow anyone to invest with a certain level of confidence.
There are actually some risk-free ways of making money where you can tap into like bank bonuses where banks offer you a cash incentive to swap banks. You can also use credit card rewards by utilizing a credit card to purchase your usual groceries and then taking advantage of the cash rewards offered for using it. There is also the type of offer you can find on websites like Oddschecker, which lists free betting opportunities with minimal risk to your money, because it goes into depth about the different options and bonuses and how exactly to get them.
Five low-risk investment strategies
Listed here are five investments strategies that offer the lowest risk for the best return on your investment available to everyone. They are available throughout America and can allow you to start your savings or retirement fund with as little risk as possible.
1. Certificate of Deposit
A Certificate of Deposit (CD) is a kind of savings account which restricts your access to it for an agreed period of time. It offers a much higher interest rate than what can be found with a more flexible regular savings account. A CD will either have a fixed or variable rate of interest, it could be tracked to the stock market or other indices and will usually also be tracked to inflation. Most commercial banks will offer a CD and because of the limited inherent liquidity in this product, it is also one of the easiest products to understand. For instance, if you took out a $30,000 CD with a 3.51 percent rate of interest, it would be worth $35,648 in five years – at which point you could either reinvest or withdraw it.
2. Treasury Inflation Protected Securities
One of the lowest risk investments is called Treasury Inflation Protection Securities (TIPS). These are US Treasury-backed bonds that offer a fixed rate of interest that remains in place for the term of the bond. On top of that fixed rate of interest, which is usually low (0.35 – 0.50 percent, much lower than other investments like CDs) is the inflation protection of that investment. This means that whatever the rate of inflation grows at during the period of your bond, your investment value will also rise at that rate – which could make it much more attractive in the long term.
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3. Municipal Bonds
When a state or local government needs to raise or borrow money, it can issue a municipal bond. You can purchase these bonds which are both low risk because the likelihood of the state defaulting or going bankrupt is very low, and they also have tax benefits. Municipal bonds are exempt from income tax, so if you are trying to manage your tax exposure, these might be a smart investment.
4. Peer-To-Peer Lending
Peer-to-peer (P2P) lending is great for short-term investment. You can find a lending platform to invest on and then you choose to “lend” money to someone; a business, an entrepreneur or a startup, with the premise they will pay you back plus interest. The risks lie in not screening or analyzing the merits of the loan, so due diligence is necessary. Most lending platforms have facilities to help with this screening process and investment opportunities offered to you will only fit the parameters and level of return you have preselected. Your capital investment can be spread across multiple loans further reducing your exposure and risk.
5. US Savings Bonds
Savings Bonds are similar to CDs and Treasury Bonds in that they are backed by the Federal government and have two methods of interest rate: a fixed interest part and the part linked to the inflation rate which can go up or down and is adjusted each month. While interest rates are low right now, the investment isn’t one for short-term investors. However, the Treasury does guarantee that your investment will double if held for 20 years.
It’s always good to look to reduce your risk when it comes to investments. Just how much you do that depends on personal preference. If you are looking for strong, safe investment always read the small print and always make sure you understand the restrictions and timescales of the product before weighing up the benefits.