Whether you’re a seasoned investor or you’re just getting started, chances are you’re looking for the best investments that offer low risk and high returns. With the economy and markets constantly fluctuating, knowing where to invest your money for the best return this year can be challenging.
However, you can balance stability and growth by diversifying your portfolio and considering alternative investments. Whether you’re an experienced investor or an amateur, these options may help you achieve your financial goals.
1. Savings Accounts With A High Rate Of Return
A high-yield savings account is the safest possible investment because of its high returns and lack of danger. The Federal Deposit Insurance Corp. can reimburse you up to $250,000 if your money is stolen or destroyed at a bank.
High-yield savings accounts are very liquid, allowing you to withdraw your money whenever needed without incurring any fees. The returns may, however, not be as thrilling as those on the stock market. Putting money in a savings account for emergencies is a wise financial move.
2. Government Bonds
Government bonds are the best alternative if you want to earn more money than you would with a savings account without taking on any additional risk.
The bonds‘ yields range from 2.46 percent for a one-month term to 3.58 percent for a 30-year maturity (as of mid-September 2022). The United States government guarantees all outstanding Treasury bonds with full faith and credit.
The US has a long history of honoring its debt commitments. This reliable debt can be bought and sold quickly on secondary markets if you need access to your money before it matures.
3. Tax Lien Certificates
Investing in tax lien certificates is another way some investors earn safe, secured, fixed interest on their investments. Still, it’s important to understand the process and risks involved before getting started. Take a free investment course from the US Tax Lien Association to understand how to invest in tax lien certificates.
It’s important to note that tax lien investing carries certain risks, and it’s not for everyone. You should know the risks and consider your risk tolerance and goals before you invest. It’s also a good idea to consult with professionals in the field (other tax lien investors, attorneys, financial advisors, etc.).
4. Money Market Funds
Pools of low-risk investments like certificates of deposit (CDs), short-term bonds, and money market funds are made available by numerous brokerages and mutual fund providers.
Unlike CDs, money market funds are like savings accounts, but investors are not subject to early withdrawal fees. Experts claim that money market funds are low-risk investments because the bank will prevent the interest rate from falling below a certain level and the share price from falling below $1.
5. Corporate Bonds On Businesses
High-quality corporate debt is another choice for investors who do not mind taking on more risk in exchange for larger payouts. The interest rates on bonds that are issued by reputable, profitable corporations are higher than those on U.S. Treasury securities or money market accounts.
According to the Federal Reserve Bank of St. Louis, the average interest rate on 10-year high-quality bonds is 4.57% as of August 2022.
The following are extremely improbable with high-quality corporate bonds, but they are nonetheless possible:
Interest rates rise as a result of inflationary pressures
Because bonds have fixed interest rates for a given length of time, your funds will not benefit from the higher rate of return that may otherwise be available.
If interest rates rise, you may be obliged to sell your bonds at a loss. If you can wait for the bond’s maturity date, you’ll receive your initial investment back, plus interest.
Default occurs when the issuer goes insolvent
Investment-grade bonds, despite their stellar performance history and widespread reputation as a safe investment option, do not provide the same level of safety as bank deposits.
To enhance your chances of getting paid back, it is best to prioritize debt issued by organizations with strong credit ratings.
The Bottom Line
Investing this year with low risk and high return can be achieved by diversifying your portfolio and focusing on long-term investments. Researching and consulting with a financial advisor before making investment decisions is essential.