You work hard for your money, and the last thing you may want to do is to make risky investment decisions that could result in the loss of your funds. However, you also need your funds to continue to grow. With this in mind, you may be looking for the safest investments available currently. There are numerous investment options to consider, and you may find that diversifying your money across several of these options is a wise decision.
Risk and return are unfortunately strongly correlated in the investment world. Riskier investments tend to generate a greater return, but they also come with the possibility of losing money.
However, there are some investments that offer minimal risk and that can still help you to grow your money over time. If you are looking for the safest investments available this year, think about using some of these options.
One popular, low-risk option to consider using for your funds is a traditional bank savings account. The interest rate offered on these accounts vary from financial institution to institution, so it may pay off to shop around and search for the best deal.
Many banks offer a higher rate of return on a savings account if you can maintain a high balance, such as $25,000 or more. With a savings account, there is essentially no risk associated with having your funds in this type of investment up to $250,000.
This is because the Federal Deposit Insurance Corporation, or FDIC, insures savings accounts up to this amount. The FDIC insurance means that you will not lose your money if the bank collapses or closes.
Most checking accounts do not generate interest, but some accounts that have a high minimum account balance may. In addition, there may be some limitations regarding the number of transactions you have permission to make with this account each month.
This limitation makes a rewards checking account unattractive for many people to use as a primary account. However, it may be a great option to consider using as a secondary account.
Because the return on a rewards checking account may be higher than with a traditional savings account, some people will use a rewards checking account rather than a savings account to keep their rainy day funds on hand.
Another option available to you when you are searching for the safest investments available is a CD or a certificate of deposit. You can purchase a CD at your choice of values, and $1,000 is the lowest minimum investment amount in most cases.
The return on a CD is typically slightly better than with a savings account, and this means that your money can grow at a faster rate. However, CDs have a maturity date, and you may be charged a fee if you turn in your CD before the maturity date.
This means that CDs are fairly non-liquid. You may not reasonably be able to touch your funds until after they reach their maturity date.
Some investors will create a CD ladder, which essentially means that you purchase CDs incrementally so that the CDs mature on a regular schedule in the future. Some, for example, will have a CD ladder setup that pays them a return every month.
CDs are similar to bonds because of their low level of risk, but you may find that bonds have a slightly better yield than a CD in many cases. Bonds can be issued by the government, municipalities and other sources, and some may offer a yield up to eight percent or higher.
Interest is typically paid to the investor every six months, but there is some variation to this. As is the case with a CD, however, a bond has a maturity date. If you need to pull your money out of the bond prior to this maturity date, you may be charged a sizable fee.
Remember that bonds can be purchased with an investment ladder in mind as well.
A money market account, or MMA, is another option to consider when you need to keep your money in the safest investments available. This is a low-risk account because the account typically will not decrease in value.
However, unlike with a savings account, a money market account doesn’t have the FDIC insurance. The rate of return for a money market account is typically higher than with a savings account. You may also not be limited to the number of transactions you can make with this account each month.
In addition, unlike with bonds and CDs, this is a liquid account. This means that you can access your money market account funds at any time without penalty. Because of this, some people will keep savings funds or rainy day funds in a money market account rather than in a traditional savings account.
Annuities are insurance products that are used as investments to generate a stable income. You will purchase an annuity with a large lump sum of cash, or you may buy the annuity over several months or years. If you opt for a fixed annuity, you will receive regular monthly or quarterly payments over a defined term.
Some terms are five to ten years, and some may extend for a lifetime. Annuities are low risk because many have a guaranteed rate. However, you typically cannot cash in an annuity easily. This means that your lump sum investment amount is not available for you to draw against if needed.
An alternative to a fixed annuity is a variable annuity. The rate of return fluctuates on this type of annuity, so you could potentially receive lower annuity payments. However, the rate may also increase in some cases, and market changes could work in your favor in this case.
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Another safe investment option to consider is a post office time deposit account, also known as a POTD. This type of investment may have a slightly better yield than a CD or bond. You typically will choose a term length between one and seven years, but there is some variation to this.
The interest is compounded quarterly, and it is paid out to the investor annually. This is a non-liquid account, so you won’t have access to your funds during the term without paying a penalty. While this may be a less familiar investment to you, it is a great option to research and consider.
Nobody wants to see their investments lose value. However, this is a very real possibility if you decide to invest in stocks and mutual funds. While stocks and mutual funds have a higher yield than the safest investments here, there is a possibility to lose some or all your money with them. A savvy investor may spread his or her money across multiple of the safest investments; as well as a few riskier investments that may generate a great return over the years.
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