Investing can be one of the most powerful ways to build a considerable amount of wealth. However, there are always potential risks included. If you are someone who doesn’t like risks and wants to go with a more conservative approach, low-risk investments are the perfect solution for you.
These types of investments offer a way to protect your capital while still achieving slow but modest growth. Low-risk investments also help you avoid volatility in the market, so you can just focus on achieving steady growth.
Let’s take a look at 4 of the best-performing low-risk investments you can consider.
1. Certificates of Deposit (CDs)
As most of you may already know, certificates of deposit are among the safest investments available. They are time deposits offered by banks with fixed interest rates and maturity dates. By locking in your money for a specified period, typically ranging from a few months to several years, you earn a guaranteed return on your investment.
While the returns might be lower compared to riskier options, the security of your principal makes these certificates of deposit an attractive low-risk investment. You can find a high-yield savings account protected by FDIC insurance to save your money and get a steady amount of regular income.
2. Exchange Traded Funds
Exchange-traded funds (ETFs) have gained immense popularity for their ability to provide investors with a diversified portfolio. This type of fund provides minimized risk. The biggest benefit of ETFs is that you get instant diversification.
While more like mutual funds, ETFs trade on stock exchanges just like individual stocks. This approach offers liquidity that mutual funds may lack. Investors can buy and sell ETF shares throughout the trading day at market prices, which provides flexibility and ease of access to their investment.
The best thing about these funds is that ETF investing by SoFi has lower expense ratios compared to actively managed mutual funds. This is what appeals to investors who are aiming to maximize results.
3. Treasury Securities
Issued by the U.S. Department of the Treasury, treasury securities are considered one of the safest investments globally. These include Treasury Bills (T-Bills), Treasury Notes, and Treasury Bonds. Backed by the full faith and credit of the U.S. government, these securities provide a fixed interest rate and are virtually free of default risk.
T-bills are short-term investments with maturities of one year or less, while Treasury notes can have maturities of up to 10 years. If you are looking for more, you can go with treasury bonds. These bonds mature for up to 30 years.
Apart from these treasury elements, the U.S. Treasury also issues Treasury inflation-protected securities (TIPS). TIPS are the types of securities whose value goes up or down based on the rate of inflation.
A general practice in earning good income from this type of investment is to keep Treasurys until they are mature enough. This way, you won’t lose any movie unless you invest in a negative-yielding bond.
4. Real Estate Investment Trusts (REITs)
Real estate investment trusts are companies that own, operate, or finance income-generating real estate across various sectors such as residential, commercial, or industrial. REITs provide a way to invest in real estate without the need for direct property ownership.
Simply put, you will not have a property to look after, but you still can benefit from the increasing property value in the near future. REITs often distribute a significant portion of their earnings as dividends, which offers a steady income stream to investors.
While the value of REIT shares can fluctuate, the stable income and potential for capital appreciation make them a low-risk alternative to other types of investments.
