The cost of living these days are constantly rising, therefore it is wise if we handle our investments effectively. However, most people nowadays have never invested before and have little knowledge of what benefits investing bring. Investing basically is putting your money on something in which you can expect a gain whether it is in a short or long term. But in making these investments there are risks involved may make you lose some money. The main function of any investment is to protest the money you’ve earned form inflation and taxation while you earn a little more that you can use for your needs in the future. To make things clear, investing is not a way for you to earn money fast but slowly and effectively, you have to be very careful when making an investment though. To help you decide on which investment to take, we made a list of the low risk investments available.
There are investments that promise high return rates, which means that you don’t have to invest that much amount before you can get your investment goals. But of course, it also means that the higher the return that you expect in a shorter period the higher the risk that you will be taking. But you don’t have to worry because there is a type of investments that you could take that has the least possibility that you may lose the money you invested. These are what we call low risk investments.
10. Savings Account
You can use the current account that you that you are using for your everyday expenses, but it is wise that you place all the excess amounts into your savings account. The first thing you have to do is to carefully check the features and its interest rates. This is suitable for people who would need to withdraw money in such short notice. This type of investment is perfect if you ever need cash for any emergencies, however, this investment doesn’t offer much growth rate.
9. Peer to Peer Lending
This type of investment is different from the others. Because instead of investing or buying shares from companies, you are simply lending money to people that you know with the hopes that they will return the amount borrowed. When making peer to peer lending, you have to screen the people you would lend your money to very carefully because trusting your money to wrong people may result to loosing your money.
8. Preferred Stock
Instead of getting a common stock, you could just get a preferred stock. This is a stock with added dividend. This type of stock has both an equity portion and a debt portion. That is how a company issues a preferred stock. This type of stock is between bonds and common stock, which make it less risky than getting a common stock.
7. Cash Value Life Insurance
Not only does this type insurance pay your beneficiaries with the death benefits on your death, it also allows you to accrue value in an investment throughout your payment. The best examples for cash value insurance are whole life insurance and universal life insurance. When you get a term life insurance, though it is the cheapest option, it will only cover your death. The best thing about getting a cash value insurance is not only that you can you can borrow the accrued value, it is not also subject to income tax. This is a great way to pass money to your heirs without getting hit by income tax.
Another safe option where you could invest your money is by purchasing bonds. These growth bonds are sold by insurance companies that will guarantee to repay the original amount together with an interest by holding the value for the full term. The terms can go on up to 5 years. This is a fixed-rate product, which means that you may lose out when the base rate gets higher. This type of investment does not have high interest rates and it is only risk free when you only want the return of your original investment. This is because the interests are based on the stock market performance.
5. U.S. Savings Bonds
This is a very stable investment because it is backed by the United States Federal Government. They also offer higher interest rates than most banks. If you are one of those people who want safety for their capital, you don’t have to worry because as long as the government is around, you can be assured that your money is safe together with the interest.
4. Treasury Bonds
By issuing treasury bonds, the government can have funds for its projects. It is like giving a loan to the government and like all loans, the payment of the principal will be accompanied with a fixed interest rate. Since these bonds are issued by the U.S. Government, this means that the investment is almost risk free. The only thing that may lead to low interests is the inflation. But still, these bonds are exempt of local taxes. Only federal taxes are in effect because of the earned interest.
3. Short Term Investment Fund
This type of investment is ideal for investors who need a avenue where they can place their funds temporarily before moving them to an investment that can give higher interest.
2. Municipal Deposit
This is a type of bond that is issued by the local government or their agency. The interests from this investment are most of the time is exempted from federal income tax and income tax of the state in which it is issued. However, there are some issued bonds for certain purposes that are not exempt from taxes.
1. Certificate of Deposit
Unlike a savings account, the certificate of deposit has a fixed term with a fixed interest rate. These terms can go from three months up to five years, depending on the maturity date. You can then withdraw the whole principal together with the interest after the maturity date is reached.