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9 Low-Risk Investments to Consider

May 2, 2023
in a nutshell
  • Low-risk investments, such as high-yield savings accounts and government bonds, are often considered more conservative than others.
  • High-risk investments, such as individual stocks, are generally riskier. The trade-off is they may provide higher returns.
  • Putting your money in both types of investments can help keep your portfolio balanced.
Image of Low-risk investments are considered safer than others, so mixing these into your portfolio may help you ride out volatility in the market.
in a nutshell
  • Low-risk investments, such as high-yield savings accounts and government bonds, are often considered more conservative than others.
  • High-risk investments, such as individual stocks, are generally riskier. The trade-off is they may provide higher returns.
  • Putting your money in both types of investments can help keep your portfolio balanced.

High-risk investments can potentially lead to nice returns, but big-time losses are also possible. (We’re looking at you, individual stocks and cryptocurrency.) While you can’t avoid investment risk altogether, some investments are considered safer than others. These assets may give your investment portfolio some much-needed stability and diversification. Investors can lean on them to help counterbalance riskier holdings.

What is a low-risk investment?

With low-risk investments, the odds that you’ll lose money are normally slimmer when compared to high-risk assets. You can usually expect less robust gains in return. The upside is that these investments can help stabilize your investment portfolio, especially during times of high market volatility.

That’s not to say that high-risk investments don’t have their place. They can be seen as an essential part of growing your wealth over the long term and keeping pace with inflation. It’s all about balancing your portfolio so it reflects your overall risk tolerance, age and investment goals. That usually involves mixing some low-risk investments into your portfolio. Here’s a handful to consider.

9 low-risk investments

1. High-yield savings accounts

High-yield savings accounts offer competitive annual percentage yields (APYs), making them a good spot to park your emergency fund or money for other short-term financial goals. The average interest rate on traditional savings accounts is around 0.37%, according to the Federal Deposit Insurance Corp., or FDIC. Meanwhile, some high-yield savings accounts offer rates as high as 4%. 

These types of accounts are available largely through online banks. That means ATM access and branch availability may be limited or nonexistent, but you can often link a checking account to easily transfer funds as needed. Just know that some financial institutions and account types may limit how many electronic transfers and withdrawals you can make per month.

2. Money market funds

Instead of investing in the stock market, this type of mutual fund allows investors to buy baskets of different debt securities. That usually includes bonds and other high-quality, short-term investments. Money market funds don’t have a reputation for huge returns, but they are known for their relatively low volatility. 

You can usually invest in money market funds through a regular brokerage account. Just be aware that expense ratios, which include various management fees, usually come with the territory. The average money market fund expense ratio in 2021 was 0.12%.

3. Money market accounts

Money market accounts provide the liquidity of a checking account with the interest-earning power of a savings account. Most come with a debit card and the ability to write checks for easy access to your funds. The money you keep in the account accumulates interest, and could be considered a good holding place for an emergency fund.

As of early 2023, it’s possible to earn up to 5% or more with a money market account. Some come with fees and minimum balance requirements, so be sure to read the fine print before opening one. And like high-yield savings accounts, your monthly electronic transfers and withdrawals may be limited.

4. Corporate bonds

A corporate bond is issued by companies as a way of generating capital. When you buy one, you’re lending money to the organization that issued it. The business is then obligated to repay you over time with interest. You may receive income payments along the way or in one lump-sum payment when the bond matures. Corporate bonds are considered riskier than government-backed bonds, and many are considered low-risk investments.

Investors can evaluate a corporate bond based on company ratings. AAA-rated companies are the most financially stable. A lower rating indicates a higher potential risk for investors.

5. Certificates of deposit (CDs)

Certificates of deposit reward investors for giving up access to their money for a specified length of time. This is known as the maturity period. Generally speaking, longer maturity periods give you access to higher interest rates. But you’ll want to leave your money untouched during this time — otherwise, you’ll most likely be penalized. As of early 2023, some CDs offer rates as high as 4.50% or more. Just be on the lookout for minimum deposit requirements.

6. Treasury bonds

Issued by the U.S. government, Treasury bonds are typically low-risk and backed by the full faith and credit of the United States government. The three main types are:

  • Treasury bonds: Designed for long-term investing, T-bonds mature every 20 or 30 years and pay interest every six months. The interest rate is currently 3.875% for 20-year bonds and 3.625% for 30-year bonds.

  • Treasury bills: T-bills, as they’re called, are short-term government bonds. The longest maturity period is one year. They’re auctioned at a discount from their face value, and interest is paid when a T-bill matures.

  • Treasury notes: These government bonds also pay interest every six months. The shortest maturity period is two years, and the longest is 10 years. The yield on 10-year Treasury notes is currently 3.5%.

7. U.S. savings bonds

With savings bonds, interest is compounded every six months. That means its value grows over time. There are two main types of savings bonds:

  • Series I bonds: These combine two different interest rates: one that’s fixed and another that changes every six months based on inflation. Series I bonds purchased through April 30, 2023, have a guaranteed interest rate of 6.89%.

  • Series EE bonds: These have a fixed interest rate and are guaranteed to double in value 20 years after the purchase date. Series EE bonds purchased through April 30, 2023, will earn 2.10%.

8. Treasury inflation-protected securities (TIPS)

Since Treasury inflation-protected securities, or TIPS, are indexed to inflation, investors will earn more when inflation is up. The interest rate is also guaranteed to never drop below 0.125%. TIPS pay out a fixed interest rate every six months. They can be bought in five-, 10- or 30-year terms.

9. Municipal bonds

These kinds of bonds are available through states, cities and municipalities. Municipal bonds are considered low-risk investments, and interest earnings are exempt from federal taxes. Most state and local taxes are also exempt. As a result, a municipal bond’s yield depends on the investor’s tax bracket.

Low-risk investments are seen as an essential part of staying diversified. During economic downturns, they can help stabilize your portfolio and minimize losses. Every investor is different, so the right investments for you will depend on your risk appetite, retirement horizon and other goals. 

This material has been presented for informational and educational purposes only. The views expressed in the articles above are generalized and may not be appropriate for all investors. The information contained in this article should not be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product. There is no guarantee that past performance will recur or result in a positive outcome. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions. No level of diversification or asset allocation can ensure profits or guarantee against losses. Article contributors are not affiliated with Acorns Advisers, LLC. and do not provide investment advice to Acorns’ clients. Acorns is not engaged in rendering tax, legal or accounting advice. Please consult a qualified professional for this type of service.

Marianne Hayes

Marianne Hayes is a content strategist and longtime freelance writer who specializes in personal finance topics. 

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