10 Best Low-Risk Investments In April 2024 | Bankrate (2024)

Even as inflation comes down and the Federal Reserve’s tightening cycle looks like it’s about to end, the economy still faces the risk of a recession. Building a portfolio that has at least some less-risky assets can be useful in helping you ride out volatility in the market.

The trade-off, of course, is that in lowering risk exposure, investors are likely to earn 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. Even higher-risk investments such as stocks have segments (such as dividend stocks) that reduce relative risk while still providing attractive long-term returns.

What to consider

Depending on how much risk you’re willing to take, there are a couple of scenarios that could play out:

  • No risk — You’ll never lose a cent of your principal.
  • Some risk — It’s reasonable to say you’ll either break even or incur a small loss over time.

There are, however, two catches: Low-risk investments earn lower returns than you could find elsewhere with risk; and inflation can erode the purchasing power of money stashed in low-risk investments.

If you opt for only low-risk investments, you’re likely to lose purchasing power over time. It’s also why low-risk plays make for better short-term investments or a stash for your emergency fund. In contrast, higher-risk investments are better suited for long-term goals.

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Here are the best low-risk investments in April 2024:

  1. High-yield savings accounts
  2. Money market funds
  3. Short-term certificates of deposit
  4. Series I savings bonds
  5. Treasury bills, notes, bonds and TIPS
  6. Corporate bonds
  7. Dividend-paying stocks
  8. Preferred stocks
  9. Money market accounts
  10. Fixed annuities

Overview: Best low-risk investments in 2024

1. High-yield savings accounts

While not technically an investment, savings accounts offer a modest return on your money. You’ll find the highest-yielding options by searching online, and you can get a bit more yield if you’re willing to check out the rate tables and shop around.

Why invest: A high-yield savings account is completely safe in the sense that you’ll never lose money. Most accounts are government-insured up to $250,000 per account type per bank, so you’ll be compensated even if the financial institution fails.

Risk: Cash doesn’t lose dollar value, though inflation can erode its purchasing power.

2. Money market funds

Money market funds are pools of CDs, short-term bonds and other low-risk investments grouped together to diversify risk, and are typically sold by brokerage firms and mutual fund companies.

Why invest: Unlike a CD, a money market fund is liquid, which means you typically can take out your funds at any time without being penalized.

Risk: Money market funds usually are pretty safe, says Ben Wacek, founder and financial planner of Guide Financial Planning in Minneapolis.

“The bank tells you what rate you’ll get, and its goal is that the value per share won’t be less than $1,” he says.

3. Short-term certificates of deposit

Bank CDs are always loss-proof in an FDIC-backed account, unless you take the money out early. To find the best rates, you’ll want to shop around online and compare what banks offer. With interest rates rising substantially in recent years, it may make sense to own short-term CDs and then reinvest if rates move up. You’ll want to avoid being locked into below-market CDs for too long.

An alternative to a short-term CD is a no-penalty CD, which lets you dodge the typical penalty for early withdrawal. So you can withdraw your money and then move it into a higher-paying CD without the usual costs.

Why invest: If you leave the CD intact until the term ends the bank promises to pay you a set rate of interest over the specified term.

Some savings accounts pay higher rates of interest than some CDs, but those so-called high-yield accounts may require a large deposit.

Risk: If you remove funds from a CD early, you’ll typically lose some of the interest you earned. Some banks also hit you with a loss of a portion of principal as well, so it’s important to read the rules and check CD rates before you invest. Additionally, if you lock yourself into a longer-term CD and overall rates rise, you’ll be earning a lower yield. To get a market rate, you’ll need to cancel the CD and will typically have to pay a penalty to do so.

4. Series I savings bonds

A Series I savings bond is a low-risk bond that adjusts for inflation, helping protect your investment. When inflation rises, the bond’s interest rate is adjusted upward. But when inflation falls, the bond’s payment falls as well. You can buy the Series I bond from TreasuryDirect.gov, which is operated by the U.S. Department of the Treasury.

“The I bond is a good choice for protection against inflation because you get a fixed rate and an inflation rate added to that every six months,” says McKayla Braden, former senior advisor for the Department of the Treasury, referring to an inflation premium that’s revised twice a year.

Why invest: The Series I bond adjusts its payment semi-annually depending on the inflation rate. With high inflation levels, the bond is paying out a sizable yield. That will adjust higher if inflation continues to rise, too. So the bond helps protect your investment against the ravages of increasing prices.

Risk: Savings bonds are backed by the U.S. government, so they’re considered about as safe as an investment comes. However, don’t forget that the bond’s interest payment will fall if and when inflation settles back down.

If a U.S. savings bond is redeemed before five years, a penalty of the last three months’ interest is charged.

5. Treasury bills, notes, bonds and TIPS

The U.S. Treasury also issues Treasury bills, Treasury notes, Treasury bonds and Treasury inflation-protected securities, or TIPS:

  • Treasury bills mature in one year or sooner.
  • Treasury notes stretch out up to 10 years.
  • Treasury bonds mature up to 30 years.
  • TIPS are securities whose principal value goes up or down depending on the direction of inflation.

Why invest: All of these are highly liquid securities that can be bought and sold either directly or through mutual funds.

Risk: If you keep Treasurys until they mature, you generally won’t lose any money, unless you buy a negative-yielding bond. If you sell them sooner than maturity, you could lose some of your principal, since the value will fluctuate as interest rates rise and fall. Rising interest rates make the value of existing bonds fall, and vice versa.

6. Corporate bonds

Companies also issue bonds, which can come in relatively low-risk varieties (issued by large profitable companies) down to very risky ones. The lowest of the low are known as high-yield bonds or “junk bonds.”

“There are high-yield corporate bonds that are low rate, low quality,” says Cheryl Krueger, founder of Growing Fortunes Financial Partners in Schaumburg, Illinois. “I consider those more risky because you have not just the interest rate risk, but the default risk as well.”

  • Interest-rate risk: The market value of a bond can fluctuate as interest rates change. Bond values move up when rates fall and bond values move down when rates rise.
  • Default risk: The company could fail to make good on its promise to make the interest and principal payments, potentially leaving you with nothing on the investment.

Why invest: To mitigate interest-rate risk, investors can select bonds that mature in the next few years. Longer-term bonds are more sensitive to changes in interest rates. To lower default risk, investors can select high-quality bonds from large, reputable companies, or buy funds that invest in a diversified portfolio of these bonds.

Risk: Bonds are generally thought to be lower risk than stocks, though neither asset class is risk-free.

“Bondholders are higher in the pecking order than stockholders, so if the company goes bankrupt, bondholders get their money back before stockholders,” Wacek says.

7. Dividend-paying stocks

Stocks aren’t as safe as cash, savings accounts or government debt, but they’re generally less risky than high-fliers like options or futures. Dividend stocks are considered safer than high-growth stocks, because they pay cash dividends, helping to limit their volatility but not eliminating it. So dividend stocks will fluctuate with the market but may not fall as far when the market is depressed.

Why invest: Stocks that pay dividends are generally perceived as less risky than those that don’t.

“I wouldn’t say a dividend-paying stock is a low-risk investment because there were dividend-paying stocks that lost 20 percent or 30 percent in 2008,” Wacek says. “But in general, it’s lower risk than a growth stock.”

That’s because dividend-paying companies tend to be more stable and mature, and they offer the dividend, as well as the possibility of stock-price appreciation.

“You’re not depending on only the value of that stock, which can fluctuate, but you’re getting paid a regular income from that stock, too,” Wacek says.

Risk: One risk for dividend stocks is if the company runs into tough times and declares a loss, forcing it to trim or eliminate its dividend entirely, which will hurt the stock price.

8. Preferred stocks

Preferred stocks are more like lower-grade bonds than common stocks. Still, their values may fluctuate substantially if the market falls or if interest rates rise.

Why invest: Like a bond, preferred stock makes a regular cash payout. But, unusually, companies that issue preferred stock may be able to suspend the dividend in some circumstances, though often the company has to make up any missed payments. And the company has to pay dividends on preferred stock before dividends can be paid to common stockholders.

Risk: Preferred stock is like a riskier version of a bond, but is generally safer than a stock. They are often referred to as hybrid securities because holders of preferred stock get paid out after bondholders but before stockholders. Preferred stocks typically trade on a stock exchange like other stocks and need to be analyzed carefully before purchasing.

9. Money market accounts

A money market account may feel much like a savings account, and it offers many of the same benefits, including a debit card and interest payments. A money market account may require a higher minimum deposit than a savings account, however.

Why invest: Rates on money market accounts may be higher than comparable savings accounts. Plus you’ll have the flexibility to spend the cash if you need it, though the money market account may have a limit on your monthly withdrawals, similar to a savings account. You’ll want to search for the best rates here to make sure you’re maximizing your returns.

Risk: Money market accounts are protected by the FDIC, with guarantees up to $250,000 per depositor per bank. So money market accounts present no risk to your principal. Perhaps the biggest risk is the cost of having too much money in your account and not earning enough interest to outpace inflation, meaning you could lose purchasing power over time.

10. Fixed annuities

An annuity is a contract, often made with an insurance company, that will pay a certain level of income over some time period in exchange for an upfront payment. The annuity can be structured many ways, such as to pay over a fixed period such as 20 years or until the death of the client.

With a fixed annuity, the contract promises to pay a specific sum of money, usually monthly, over a period of time. You can contribute a lump sum and take your payout starting immediately, or pay into it over time and have the annuity begin paying out at some future date (such as your retirement date.)

Why invest: A fixed annuity can provide you with a guaranteed income and return, giving you greater financial security, especially during periods when you are no longer working. An annuity can also offer you a way to grow your income on a tax-deferred basis, and you can contribute an unlimited amount to the account. Annuities may also come with a range of other benefits, such as death benefits or minimum guaranteed payouts, depending on the contract.

Risk: Annuity contracts are notoriously complex, and so you may not be getting exactly what you expect if you don’t read the contract’s fine print very closely. Annuities are fairly illiquid, meaning it can be hard or impossible to get out of one without incurring a significant penalty. If inflation rises substantially in the future, your guaranteed payout may not look as attractive either.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.

10 Best Low-Risk Investments In April 2024 | Bankrate (2024)

FAQs

10 Best Low-Risk Investments In April 2024 | Bankrate? ›

To potentially turn $10k into $100k, consider investments in established businesses, real estate, index funds, mutual funds, dividend stocks, or cryptocurrencies. High-risk, high-reward options like cryptocurrencies and peer-to-peer lending could accelerate returns but also carry greater risks.

How to turn 10k into 100k? ›

To potentially turn $10k into $100k, consider investments in established businesses, real estate, index funds, mutual funds, dividend stocks, or cryptocurrencies. High-risk, high-reward options like cryptocurrencies and peer-to-peer lending could accelerate returns but also carry greater risks.

What is the safest investment with the highest return? ›

The concept of the "safest investment" can vary depending on individual perspectives and economic contexts, but generally, cash and government bonds, particularly U.S. Treasury securities, are often considered among the safest investment options available. This is because there is minimal risk of loss.

What investment is 100% safe? ›

Treasury Bills, Notes and Bonds

U.S. Treasury securities are considered to be about the safest investments on earth. That's because they are backed by the full faith and credit of the U.S. government. Government bonds offer fixed terms and fixed interest rates.

How can I get 10% interest on my money? ›

Where can I get 10 percent return on investment?
  1. Invest in stocks for the short term. ...
  2. Real estate. ...
  3. Investing in fine art. ...
  4. Starting your own business. ...
  5. Investing in wine. ...
  6. Peer-to-peer lending. ...
  7. Invest in REITs. ...
  8. Invest in gold, silver, and other precious metals.

How to double $10,000 fast? ›

Here are some ways to flip $10,000 fast:
  1. Flip items (buy low, sell high)
  2. Start a blog.
  3. Start an online business.
  4. Write an email newsletter.
  5. Create online courses or teach online.
  6. Invest in real estate with EquityMultiple.
Apr 8, 2024

How long does it take 100K to turn into 1 million? ›

1: Simply let compounding work its magic. Over the long haul, the stock market has provided average annual total returns somewhere in the neighborhood of 10%. If the future ends up like the past, $100,000 would grow into $1 million in just over 24 years from compounding alone.

Should a 70 year old be in the stock market? ›

Conventional wisdom holds that when you hit your 70s, you should adjust your investment portfolio so it leans heavily toward low-risk bonds and cash accounts and away from higher-risk stocks and mutual funds. That strategy still has merit, according to many financial advisors.

Which investment is best for senior citizens? ›

For senior citizens in India, a combination of SCSS, PMVVY, POMIS, FDs, and carefully selected mutual funds can form a robust investment strategy.
  • Pradhan Mantri Vaya Vandana Yojana (PMVVY)
  • Post Office Monthly Income Scheme (POMIS)
  • Fixed Deposits (FDs) for Senior Citizens.
  • Tax-Saving Tips:
Mar 5, 2024

Which investment gives highest return with low-risk? ›

Best Low-Risk Investments With High Returns
  • High-Interest Savings Account. ...
  • Annuities. ...
  • Money Market Mutual Fund. ...
  • Municipal Bonds. ...
  • Certificate of Deposits. ...
  • Debt-focused Unit Linked Insurance Plans (ULIPs) ...
  • Treasury Bills. ...
  • Fixed Deposits.
Jan 29, 2024

How to get 15% return on investment? ›

Consider investing Rs 15,000 per month for 15 years and earning 15% returns. After 15 years, the total wealth will be Rs 1,00,27,601 (Rs. 1 crore). According to the compounding principle, if we implement these very same returns and contributions for another 15 years, the amount we accumulate grows enormously.

What is the number 1 rule investing? ›

Warren Buffett once said, “The first rule of an investment is don't lose [money]. And the second rule of an investment is don't forget the first rule.

What are three very risky investments? ›

While the product names and descriptions can often change, examples of high-risk investments include: Cryptoassets (also known as cryptos) Mini-bonds (sometimes called high interest return bonds) Land banking.

Where to put $10,000 for best interest? ›

Many investment experts recommend a 60/40 mix. That is an investment portfolio invested 60% in equities (company shares) and 40% in bonds. For higher returns, an attractive investment for £10,000 could be shares or equity funds (which are made up of shares).

Where to get 20% return on investment? ›

Here are a few strategies that could potentially generate a 20% return in a year:
  • Investing in stocks: Historically, stocks have delivered the highest returns of any asset class over the long-term. ...
  • Investing in real estate: Real estate investments can generate strong returns through rental income and appreciation.
Mar 19, 2023

Where can I get 12% interest on my money? ›

Where can I find a 12% interest savings account?
Bank nameAccount nameAPY
Khan Bank365-day, 18-month and 24-month Ordinary Term Savings Account12.3% to 12.8%
Khan Bank12-month, 18-month and 24-month Online Term Deposit Account12.4% to 12.9%
YieldN/AUp to 12%
Crypto.comCrypto.com EarnUp to 14.5%
6 more rows
Jun 1, 2023

How to flip 10k fast? ›

7 Proven Ways to Double $10k Quickly
  1. Retail Arbitrage.
  2. Invest in Stocks & ETFs.
  3. Start an AirBnb.
  4. Invest in Real Estate.
  5. Peer to Peer Lending.
  6. Cryptocurrency.
  7. Resell Products on Amazon FBA.

How much can 10k grow in 10 years? ›

For example, if you put $10,000 into a savings account with a 4% annual yield, compounded daily, you'd earn $408 in interest the first year, $425 the second year, an extra $442 the third year and so on. After 10 years of compounding, you would have earned a total of $4,918 in interest.

How do I grow my $10,000? ›

If you have $10,000 to invest, a financial advisor can help you create a financial plan for the future.
  1. Max Out Your IRA.
  2. Contribution to a 401(k)
  3. Create a Stock Portfolio.
  4. Invest in Mutual Funds or ETFs.
  5. Buy Bonds.
  6. Plan for Future Health Costs With an HSA.
  7. Invest in Real Estate or REITs.
  8. Which Investment Is Right for You?
Jun 21, 2023

What is the best business to start with 10k? ›

10 examples of the best businesses to start with $10K
Business typeDifficulty level
Food truckModerate
Ecommerce businessModerate
Photography companyModerate
Pet grooming businessModerate
6 more rows
Mar 25, 2024

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