5 Low Risk Investments For You


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.

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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.

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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