Choosing the right and safe investments is quite tricky, especially during volatile times in the market. These low-risk investment recommendations from Bankrate might help you decide which investment you must consider to meet your financial goals.
Why low-risk investments?
After a volatile end to 2018, wary investors may be searching for stability in 2019. Even for aggressive stock market fiends, an investment portfolio that’s diversified with less-risky assets is vital to ensure your earnings see growth over time.
What to consider
The trade-off, of course, is that in lowering risk exposure, investors are likely to see lower returns over the long run. That may be fine if your goal is to preserve capital and maintain a steady flow of interest income. But if you’re looking for growth, consider investing strategies that match your long-term goals.
Risk tolerance and time horizon play big roles in deciding how to allocate your investments. Conservative investors or those near retirement may be more comfortable allocating a larger percentage of their portfolios to less-risky investments to minimize risk. These are also great for people saving for short term (about five years or fewer) or intermediate (around a decade) goals.
Those with stronger stomachs and workers still accumulating a retirement nest egg probably can fare better with riskier accounts, as long as they diversify. Be prepared to do your homework and shop around for the accounts that fit both your short- and long-term goals.
If you’re looking to minimize your portfolio’s risk, here are a few of the safest investments to consider.
Overview: best investments in 2019
1. Certificates of deposit
These federally insured time deposits have specific maturity dates that can range from several weeks to several years. Because these are “time deposits,” you cannot withdraw the money for a specified period of time without penalty.
The financial institution pays you interest at regular intervals. Once the CD matures, you get your original principal back plus any accrued interest. Today you can earn as high as nearly 3 percent interest.
Risks: CDs are considered safe investments. However, they do carry reinvestment risk — the risk that when interest rates fall, investors will earn less when they reinvest principal and interest in new CDs with lower rates. The opposite risk is that rates will rise and investors won’t be able to take advantage because they’ve already locked their money into a CD.
Consider laddering CDs — investing money in CDs of varying terms — so that all your money isn’t tied up in one instrument for a long time. CD returns are inching up as interest rates are on the rise, but it’s important to note that inflation and taxes could significantly erode the purchasing power of your return.
Liquidity: CDs aren’t as liquid as savings accounts or money market accounts because you tie up your money until the CD reaches maturity — often for months or years. It’s possible to get at your money sooner, but generally you’ll pay a penalty.
For more investment ideas, continue reading HERE.