Secure Your Future with Low-Risk, High-Return Investments

All investments are risky. Even the most secure investments carry some risk, no matter how small. But not investing is risky too; the one or two percent yearly interest rate your bank account earns will never outpace inflation. If you park your money in the bank in hopes of keeping it safe, you’ll find its purchasing power eroding severely over the coming decades.

The riskier an investment, the higher its rate of return; in order to get the returns you need to meet your financial goals, you’ll need to assume some risk. But high-risk investments aren’t the only way. With a little research and some expert investment advice, you can create a portfolio that reaps the returns you need without putting your money at too much risk.

Very Low-Risk Investments Offer a Fixed Rate of Return

The lowest-risk investments offer a fixed yearly interest rate that may or may not outpace inflation. If you’re close to retirement or already retired, these investments are ideal, because they keep your money safe while offering you a small return. Fixed-income investments are also a good idea if you know you’re going to need your money within the next few years, to pay for a child’s college education, a new car, a house down payment or another financial goal.

A certificate of deposit, or CD is one of the most common low-risk investments, and one of the most secure. As long as you buy your CD through an FDIC-insured vendor, and you have less than $250,000 invested with the vendor, your money is completely safe. In the unlikely event that your vendor becomes insolvent, the government will pony up the money. The same goes for savings accounts, interest-bearing checking accounts and money market accounts.

If you have a longer investing timeline, and you want to add some security to your portfolio, you should consider government or municipal bonds, like U.S. Savings Bonds. When you buy a savings bond, you’re loaning money to your federal, state or local government that it uses to fund its various projects, later paying you back with interest. Interest rates are low, but the chances of losing your money are extremely slim.

Get a Guaranteed Return with a Fixed Annuity

An annuity is a form of investment in which you pay an insurance carrier a lump sum of money, and they guarantee you regular payments in retirement. Annuities are very safe investments as long as you buy them from a reputable insurance carrier. The financial strength of the issuing carrier backs up the annuity.

Annuities allow you to put away as much money as you want for your retirement, and allow it to grow tax-deferred over the years. They’re much like an IRA in that respect. Most annuities charge a penalty if you withdraw money before a certain age, and most plans are protected from creditors and exempt from probate. They may not offer you much protection against inflation, however.

Outpace Inflation with Stocks and Mutual Funds

Historically, only the stock market has been able to give investors adequate protection against inflation. If you want to preserve your money’s purchasing power over the years, you’ll need to invest in stocks and mutual funds.

If you’re looking to minimize your risk, consider investing in preferred stocks. Preferred stocks are traded on the open market, offer dividends at a rate of about two percent above those offered by CDs and can be sold whenever you want with no penalties. These stocks pay quarterly or monthly dividends, so you might have to pay capital gains tax. You won’t have voting rights, but if the company is liquidated, you’ll get your money back before common stockholders.

Mutual funds are another choice if you want to stay ahead of inflation without assuming too much risk. A mutual fund is a collection of different stocks and bonds managed by a professional; investors buy shares of the fund. This allows many investors to pool their money and buy shares of stock that would otherwise be too expensive. It also brings instant diversification to your portfolio, so if one stock in the fund tanks, you won’t lose everything.

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If you’re afraid that investing your money in the stock market is too risky, you’re not alone. These days, plenty of people are still wary of the markets. But not investing is just as risky. Choose a diversified portfolio of lower-risk investments and protect your purchasing power for decades to come.