peshkov / Getty Images/iStockphoto
When the investment markets are volatile, many investors look for low-risk investments so they can keep more of their hard-earned money. If you’re looking to reduce your risk, read on.
What Investments Are Low-Risk?
When people talk about low-risk investments, they typically mean those investment vehicles in which you will lose none, or very little, of your investment. These investments may not earn much in terms of return, but most or all of your principal will be intact.
Here are some low-risk investments to consider right now.
High-Yield Savings Accounts
A high-yield savings account at an online or brick-and-mortar bank is a safe place to put some money. Interest rates are still low, but they are on the rise. Be sure to shop around for the best rate though. On July 21, 2022, Bank of America was paying between % and % APY based on aggregate account balances. Ally Bank, which is online-only, was paying % APY on the same date.
Money Market Accounts
A money market account is similar to a savings account, plus you can write checks on it. Money market accounts, like savings accounts, are typically insured by the FDIC — or if you’re getting one from a credit union, by the NCUA. This means that, even if the bank or credit union fails, your money is protected by the U.S. government.
The interest rate for money market accounts is typically similar to that of savings accounts. CIT Bank was paying .00% on their money market account as of June 22, 2022, with a minimum opening deposit of $100.
Certificates of Deposit
A certificate of deposit, or CD, is purchased from a bank or credit union, so it is also FDIC or NCUA insured. CDs offer a fixed rate of interest for a pre-determined period of time. Typically, the interest rate is higher if the term is longer, but sometimes the difference can be quite small. With interest rates rising, it’s probably best to get a short-term CD if you’re going to go this route. You don’t want to be locked into a five-year CD paying 1% if rates are 3% a year from now.
Series I Savings Bonds
Series I savings bonds are issued by and backed by the U.S. government. They pay interest every month. The interest rate is a combination of a fixed rate of interest plus a variable rate based on inflation, which is calculated twice a year. Until the end of October 2022, the interest rate is 9.62%. Savings bonds continue to earn interest for 30 years, although you can cash them in as early as one year from the date you purchased them. If you …….