12 Best Low-Risk Investments with High Returns in 2023

Like mutual funds, ETFs provide instant diversification on your money. Since they’re made up of a bunch of different assets, your investment is automatically diversified, which tends to be a good strategy for lowering risk. Even better, places like Wealthfront and Betterment can help you find the right mix of ETFs and automate your investing for you.

• So, make sure you have the knowledge and time available to do it properly.
• Treasury securities are like CDs in that your investment functions as an interest-earning loan, but you’re loaning to the government (the U.S. Treasury) instead of your bank.
• Although inflation can erode the value of a fixed annuity, many companies offer cost-of-living-adjustment (COLA) riders that help the value of your annuity keep up with rising prices.
• Luckily, there are safe investment options to help preserve your capital during unpredictable times.

However, more conservative investors can still use bonds to create income and a more diverse portfolio that’s not just made up of stocks and ETFs. They perform slightly better than savings accounts and currently yield around 3.9% to 4.4% on a one-year maturity term. A high-yield savings account is one of the best low-risk investments you can make with your money to diversify your financial portfolio. This account is treated like a traditional savings account with a much higher return on interest and the ability to withdraw at leisure. Another low-risk asset favored by investors is the preferred stock. These are hybrid securities, which have characteristics of both common stocks and bonds.

You may not want to use REITs for your entire fixed-income portfolio. But a small percentage of an allocation held in REITs can provide a boost to the overall return on that part of your portfolio. That will enable you to protect the income-generating side of your portfolio, both from market risk and inflation. If you’re in the market for an annuity, however, be aware of the risks and talk with a good financial advisor first.

Preference shares

CDs are savings products that typically have a specific term length that you deposit your money for to earn interest. The upside is that you can reliably count on your CDs to generate a specific return. The main downsides are that CD rates are generally low, and fixed-rated CDs have penalties if you withdraw your money early. They are considered less risky than common stocks but riskier than traditional government bonds, which is why their return sits at the median between the two. During the COVID-19 pandemic, many companies were forced to shut down resulting in an increased number of unemployed individuals.

With Fundrise, you can get started with a well-diversified portfolio of commercial and multi-family real estate with as little as $10. For anyone looking to start investing, I recommend just getting started small because nothing leads to learning faster than action. The easiest way to get started investing in a whole host of asset classes is through a “robo-advisor”. Historically, the S&P 500 itself has earned an average annual return of around 10% per year.

They offer individual stocks, ETFs and give you the ability to build your own custom portfolios. While it’s true that the amount of return you can get depends on how much risk (and losses) you are willing to accept, great investors make their living by balancing these forces. There’s no single correct way to invest, and the Vanguard S&P 500 ETF won’t be right for every portfolio. But if you’re looking for a low-risk, low-maintenance investment that can help you make a lot of money with minimal effort, it could be a smart option.

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That said, preferred stocks provide a nice middle ground between investments like bonds and regular stock investing. With preferred stocks, you have higher rights than common stocks that result in receiving dividend payments first. And in the event of liquidation, preferred stockholders get paid first above common stockholders. The main downsides are a lack of voting rights and less room for capital appreciation in many cases.

Best Robo-Advisors With Tax-Loss Harvesting

Perhaps the simplest and most convenient place to store your money is a basic savings account. Savings accounts at traditional banks, online banks, and credit unions are almost completely liquid. You can get your money out at any time, through any branch or ATM. For long-term investments, such as retirement savings, your top priority is to grow your money over the long term. It makes sense to take some risks with your money in the short term if it gives you better growth overall.

The U.S. government offers several types of investment options which are used to raise capital without raising taxes. These include things like T-Bills, treasury notes, bonds, and Treasury Inflation-Protected Securities. Also like mutual funds, investors own shares in the ETF in which they invest. However, https://g-markets.net/helpful-articles/rising-or-falling-wedge-pattern-in-forex-trading/ unlike mutual funds, ETFs are traded similarly to stocks on the market. ETFs also tend to charge far lower fees than mutual funds, which is something I can definitely get behind. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome.

Many of the investments outlined above can be found in different funds. Dividend funds are made up of stocks with high and reliable dividends, bond funds are made up of various bonds, and so forth. Some savings accounts pay higher rates of interest than some CDs, but those so-called high-yield accounts may require a large deposit. By definition, a low-risk investment usually offers higher returns than traditional bank deposits, but it involves less risk than other investment opportunities. Preferred stocks combine the characteristics of stocks and bonds in one security—providing investors with dependable income payments plus the potential for shares to appreciate over time.

Corporate bonds

From high inflation periods to recessions, you may be hesitant to invest your hard-earned money. Fortunately, there are safer ways to grow (and keep) your investments during downward trends. Real estate is an example of an asset that tends to produce excellent long-term growth without too much risk. Real estate investment trusts, or REITs, allow investors to gain portfolio exposure to commercial properties such as office buildings, malls, and apartment buildings. Berkshire also owns a massive stock portfolio with large positions in massive and mature businesses such as Apple (AAPL 0.9%), Bank of America (BAC 1.17%), Coca-Cola (KO 0.54%), and many more.

Finally, if you’re looking for a long-term stable income stream – with no risk – there are fixed rate annuities. But just be aware that if interest rates rise significantly after you enter your annuity contract, you’ll be stuck with a lower rate on a permanent basis. The current average dividend yield on the S&P 500 index is 1.87%. That makes large-company stocks competitive with interest rates being paid on US Treasuries, and well ahead of most local banks. But you can keep just enough funds in your local bank savings account to cover immediate needs, while keeping the largest amount in an online high-yield savings account. Keeping a portion of your portfolio in safe investments is a smart source of diversification.

Fixed interest rate annuities

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They tend to pay a modest amount of interest, but unlike other kinds of mutual funds there’s very little chance to make money from appreciation. The downside of bonds is that returns are generally lower than the market in exchange for reducing risk. And bonds have various maturation periods, so you’re locking up your money for a set amount of time.

A public company is considered to be a dividend aristocrat after having increased their annual dividend payments for a minimum of 25 years in a row. Bonds are considered low risk investments because the entities that back them are generally solid. Corporate bonds are slightly riskier than municipal bonds since corporations can go bankrupt, but they’re still a lower-risk investment you can mix into your portfolio. I Bonds are another low risk investment that also help you invest during inflationary periods.

Treasury Notes, Bills, Bonds, & TIPS

While it’s incredibly unlikely you’ll see 10% returns every single year, the annual ups and downs should average out to around 10% per year over the long haul. Greg travels the world for about 20 weeks each year and has visited over 40 countries. He holds two bachelor’s degrees, is a licensed travel insurance agent in Indiana, and is the co-author of the book Zero Down Your Debt. Lending Club and Prosper are two websites that allow you to make personal loans to borrowers.

In addition to being highly liquid, Treasury securities are a good way to diversify your portfolio with some low-risk assets during times of market volatility. Since Treasury securities are backed by the full faith and credit of the U.S. government, they’re among the safest investments available. So long as you hold them until maturity, you’re unlikely to lose any money. The longer the average term of the bonds held, the greater the risk that rising interest rates will cause the principal value of the bonds to drop, causing you to lose money on the investment. Simply put, it means there’s a greater level of assurance you’ll receive dividends on preferred stock than on common stock.

One of the historically lowest risk/highest return asset classes is real estate. The problem has always been that it’s really hard to get started with small amounts of money. While we can’t decide for you how much risk you are willing to take, we have structured this guide to give you a range of options based on zero, low or medium risk for long-term investments. Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments. The latest real estate investing content delivered straight to your inbox. Thanks to the creation of platforms like Airbnb and VRBO, short-term rental properties have become easier to manage than ever before.

Preferred Stocks

In the hierarchy of payouts to forms of investments, preferred stock sits between bond payments (which come first) and common stock dividends (which come last). When a government at the state or local level needs to borrow money, they don’t use a credit card. These bonds, also known as munis, are exempt from Federal income tax, making them a smart investment for people who are trying to minimize their exposure to taxes. Over 25% of assets may be invested in financial services industries.