Some level of risk will always be
present when it comes to any investment that is of any importance. The best you
can do is to lessen the risk as much as you can.
A low-risk investment means that you, as the investor, must
consider both the possibility of a bad outcome if the stock market crashes as well as its impact when it does happen. It does not
simply mean protecting yourself from the chance of incurring any loss, but that
you must also ensure that no potential loss will be too devastating.
Here are some low-risk investments that have the potential
to generate high returns.
1.
Certificate
of Deposits
You can get one of these by using your bank, credit union, or
even through your investment broker. They way Certificate of Deposits work, you
will deposit your money for a certain length of time.
In exchange, you can be guaranteed that your money will
return no matter what happens to the interest rates during that specific time
period.
2.
Peer-to-Peer
Lending
This is a kind of short term investment. But instead of
buying shares in a company, you will be lending your money to someone else in
hopes of getting paid back.
However this can be extremely risky if not done correctly. You
have to screen your loans properly in order to secure a decent return with
little risk from your side.
3.
Preferred
Stocks
This is something that a company issues which has both
equity and debt portions. Preferred stocks are not traded as heavily as common stocks but hold lesser risks compared to the latter. In shorter terms,
owning preferred stocks is just another way of owning a company while getting
dividend payments.
Read more about the advantages of buying preferred stocks.
4.
Municipal
Bonds
These are issued when a government at the state or local
level needs to borrow money. Municipal bonds are also sometimes called munis, and are exempted from Federal income tax. This is good for people who are
trying to minimize exposure to taxes.
Most states and local municipalities also exempt these from
income tax but first make sure that it is the case before making a decision.
5.
Money
Market Funds
This is a type of mutual fund created for investors who don’t
want to lose any of their principal investments. The fund will also give out a
little bit of interest in order to make parking your money in the fund worth
your while.
These funds might not be foolproof but they do make sure
that the underlying value of your cash is well-protected. Money Market Funds
have the goal of maintaining a Net Asset Value (NAV) of $1 per share. There
might be instances when a NAV drops below $1 but they are an extremely rare occurrence.
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