Since our first finance class in high school, we’ve all been told that investments are a good strategy to build wealth going into the future. Understanding the various types of financial investments out there and how to best utilize them can be a bit overwhelming at first. Starting with some low-risk investment strategies can be a great way to introduce yourself to the investment market without much risk.
Bank Savings Account
One of the simplest accounts you can open to start investing today is a local bank savings account. This type of account works as a place to store your money and earn some interest on it over the years. It’s important to note that bank savings accounts don’t typically offer very high-interest rates. You can expect an interest rate anywhere between one and three percent per year.
The biggest advantage of this type of investment account is that you have access to your money around the clock. If you need to pull the money out of your savings account to pay for things like unexpected car repairs or medical expenses, you can do so. This is not possible with many other forms of investments out there.
Certificates Of Deposit
Also coined CDs for short, these low-risk investment strategies have been utilized for centuries. These types of investments allow you to receive a specific interest rate on your investment over a set period of time. The fixed time period could be as little as six months or up to five years or more. While it’s completely possible to withdraw your investment funds early from your CD, there are high penalties that come along with doing so.
CDs are the best type of investment strategy for those who are not in need of their money right now. Let’s say you plan on buying a home or a new car five years from now. It’s best to get your CD investment underway so that you can get a guaranteed return on your funds around the time you plan on making your big purchase.
The U.S. Government issues many different types of securities that you can invest in. These include treasury bonds, treasury bills, EE bonds, I bonds, TIPS, and treasury notes. These investments can be bought electronically through the U.S. Treasury online account. Because these securities are backed by the government, they’re considered a very low-risk investment.
Money Market Accounts
Somewhat similar to a bank savings account, a money market account can be another great investment option. These will typically pay higher percentages than a traditional savings account but will come with some more restrictions. Most money market account providers require that you have a minimum balance in your account to qualify for interest earnings.
These types of accounts can be great for earning more money on your investment funds. However, you should be prepared to keep the funds within your account for a set period of time to get the most benefit from this type of investment account. The major benefit in this type of account over others like CDs is that you have direct access to your money at any time. If an emergency does come up, you can easily pull your investment money out of your money market account to use. Just realize you won’t be earning interest on the funds left in the account until they reach your minimum balance level set by your contract with the bank.
There are many different types of investment strategies out there to help build your future wealth. Understanding what low-risk investments are can be a great first step into getting into the investment market. It’s never a good idea to just jump in headfirst without understanding how the investment works. The above are just four of the easiest investment strategies for you to use that all come along with a low risk of losing your investment funds.