When it comes to investing your money, the allure of higher returns will be very enticing. However, the greater the potential return usually comes with a higher level of risk, where you could potentially lose a significant amount of money.
While all investing has some inherent risk, you may want to diversify your money into safe investments as well. Although you may have a “buy and hold” approach and years to go before you need to dip into your investments, having a blend of safe investment options can help you weather economic storms.
1. Traditional Savings Account
Your bank savings account is actually considered a safe investment. A traditional savings account with your bank or credit union will offer some interest on your money. Typically, you’ll use this to sock money away in an emergency fund and ensure it’s easy to quickly access if you need it.
The reason it is a safe investment is that you won’t lose money due to economic fluctuations and is insured up to $250,000 via the FDIC. What this means is that if the bank fails and can’t provide you with your money, the FDIC protects you and ensures you get that money back.
2. High-Yield Online Savings Accounts
Another option with banks is looking into an online-only bank account that offers a high-yield savings account. These online-only banks typically can offer more interest because they have less overhead costs and can instead put that towards their customers.
Many online banks offer convenience, better website and mobile experiences, and have no fees or lower fees than traditional banks. An online savings account can be a great additional place to stack your emergency fund or extra outside of it. Any good online bank will also offer FDIC protection and other security features.
3. Certificates of Deposit (CDs)
One of the safest investment vehicles out there is probably Certificates of Deposit or “CDs” as they are generally abbreviated. These will put your money to work for you over a period of time, and have very lower risk to invest.
Essentially CD investments are options that the bank promises to pay you a set rate of interest over a specified term if you leave money in that CD until the term ends. And the CDs often only require as little as $500 or $1,000 to open at a minimum.
4. Fixed Annuities
A fixed annuity is just a contract with an insurance company where you provide them money to manage and they pay you a guaranteed return. Usually, the interest on a fixed annuity is tax-deferred. Additionally, the insurance company guarantees your principal and a minimum interest rate. But the reason people like these as safe investments is fixed annuities are predictable and help you grow your money with lower risk.
5. Treasury Securities
Treasury securities are probably the most conservative investments and are considered to be quite safe. These are issued by the U.S. government and are typically divided into a few categories based on the length of the investment until they reach maturity.
There are a variety of treasury securities that include bills, notes, bonds, U.S. savings bonds, and Treasury inflation-protected securities. The securities have various levels of maturity that can actually range from a couple of days all the way to 30 years.
6. Dividend Paying Stocks
While there is certainly more risk than the previous section, dividend paying stocks are also not the highest-level of risk for the long-term either. Dividend paying stocks are companies you invest in via the stock market that have a history of consistently paying their shareholders a portion of the profits.
There are many companies on the stock market that do offer this. But a great way to ensure that is to check out this list of high-dividend stocks. What’s great about these dividend paying companies is they pay you a specified amount on a regular basis based on how many shares you own. Pending the company, this could be on a monthly or quarterly basis.
7. Index Funds
Investing in the stock market always comes with risk. But the reason index funds are included in potentially safe investment options is because of how they work. Additionally, there are many index funds that are low risk and balance out market fluctuations so you do not have crazy volatility.
An index fund is a portfolio of stocks or bonds designed to mimic the performance of a financial market index. Instead of picking individual stocks or bonds, you now have a massive exposure to a mix of companies and bond types pending the index fund you invest in.