The economy is going through a rough and unpredictable period. Inflation rates rise, yet the interest rate remains low. This is an excellent opportunity to start investing more but in a safe approach. Investors should opt to invest in low-risk investments while still sticking to creative investing. Here are a few ways you can continue to invest without fearing a life-changing financial loss.
Money Market Funds
This type of low-risk investment is not the same as money market accounts. In its operation, money market funds invest in short-term (and low-risk) debts with earnings paid in dividends. The longer the debt’s tenure, the higher the risk. Hence, money market funds can offer you a higher yield than a typical money market account with minimum risk.
What’s great about this investment is that you can take out your money anytime you want. However, you may lose your principal since the money market price fluctuates. Although the loss may not be too significant, it’s enough to grind your teeth.
High-Yield Savings Accounts
Are you looking for low-risk investments that work just like your good-old savings account? This is the product for you. The only investment risk of a high-yield savings account is that the interest is not high enough to beat the inflation rate. The longer you keep your money here, the lesser the value becomes.
But don’t let it hinder you from starting your own investment journey. It’s easy and completely safe. Newbie investors can deposit their money and never have to worry about it. The tip is to find savings account products with the highest interest rates and no administration fee.
Low Barrier, Fixed Deposit Accounts
This investment takes savings accounts to a new level. Arguably, a fixed deposit account offers a higher yield than a savings account. With that in mind, you should note that you cannot touch it over an agreed period of time once you’ve put in the money. The interest rate for fixed deposit accounts may vary based on the amount of money you invest in, the term, and rates appointed by the bank.
The advantage is that you are guaranteed to have a fixed return amounting to 3%-5% per annum. But then again, please consider how much money you are willing to lock in a fixed deposit account. It’s best to invest with your cold money. If you’re not interested in a savings or deposit account, there are still other low-risk investments that you can choose.
Aren’t stocks supposed to be included in high-risk investments? Yes and no. As the name suggests, dividend-paying stocks pay off investors periodically from the company’s revenues. It’s more stable than non-dividend stocks, where the funds will be used for future business development to increase the stock value. Nevertheless, this investment is not without its own risk. The price will fluctuate following the market, but it won’t drop as hard as high-growth stocks. Another benefit is that you’ll accept regular passive income from the dividend.
Money market funds invest in short-term bonds, whereas this investment focuses on high-earning companies that issue long-term bonds. Investors should choose corporate bonds from reputable and high-earning companies only to minimize the default risk. If the company goes bankrupt, the investment will be worth nothing.
However, try not to choose corporate bonds with long tenure. This is to avoid an increased interest rate. As the interest rate goes up, the bond value drops, and vice versa. Like dividend-paying stocks, corporate bonds are more suited for investors looking to diversify their portfolios.
It’s always great to have low-risk investments to mitigate your money-making risks. Please don’t put all your eggs in one basket, as they say. Whatever product you choose, always be sure to understand the risk and have a safety net. Instead of keeping your money in your wallet or payroll account, take the first step to grow your money with a safe investment option.
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