Safe Investments – Where Can You Find Them?
“Where can you find safe investments?”
That’s the question that virtually everyone has!
Safe investments come with a relatively low risk – at least, compared to other opportunities – and a decent rate of return. You might not get the huge payout that you can get from a risky investment, but you also don’t have to worry as much about losing everything in the meantime.
Don’t be fooled, though. Even safe investments can be risky. There is always a chance that you will lose your principal investment, or that inflation will become too much for you to make a profit.
That being said, though, some investments are just inherently safer than others.
So where do you find them?
1. Money market funds
When you open up a money market fund, you give your money to professional investors. In return for letting them use your money, they give you a portion of their earnings. When your money market fund matures, you get your original investment back – along with your portion of the dividends.
Usually, this is a safer investment than trying to play the stock market yourself, because these professionals have training, experience, and expertise that you don’t. However, if your professional investors lose money, you will, too.
2. Government bonds
These are similar to money market funds – only you’re dealing with the federal government, instead of an investment company.
When you buy government bonds, the federal government spends the money and guarantees you a fixed rate of return down the road. And, since you are dealing with the massive federal government – instead of a particular private company – the odds of them not being able to pay you back are much, much lower.
3. Fixed annuities
Done through a private insurance company, you give the company money to invest. In return, you get a guaranteed payout later. Usually, the returns on fixed annuities are paid out on a monthly or yearly basis. But, since the return is guaranteed, fixed annuities come with lower rates than things like money market funds or 401K’s.
Fixed annuities are a popular retirement investment option because people know they will be able to count on a specific amount of money coming in every month or every year.
4. Certificates of deposit
Also known as “CD’s”, certificates of deposit have been around for a long time – because they are such safe investments.
Certificates of deposit are similar to traditional savings accounts, but they come with some extra nuances. You can buy a certificate of deposit right at your local bank in just a few minutes. When you buy one, the bank agrees to give you a higher interest rate than they would in a traditional savings account.
So, what’s the catch?
You only get that higher interest rate if you agree to keep your money tied up in the certificate of deposit for a specific amount of time. So, you have to wait awhile before you can actually take advantage of that higher interest rate. In the meantime, the bank uses your money to invest on its own behalf.
To learn more, visit investing for beginners.