What is your investment portfolio? Do you want all the risks and all the rewards? Or do you want none of the risks and only some of the wards? Unless you are Gordon Gekko or you are in the market every hour of the day, it is best to be a low-risk investor. The best low risk investments will give you peace of mind so that you can survive the busts and the booms.
The investment market is volatile. If you are making any short-term plays, you probably feel like you are taking ecstasy. It’s rough. If, however, you are taking it easy and making long-term movements, then you are watching the madness from the sidelines with a bag of popcorn and a steady supply of Pepto Bismol. Sure, it is not as fun, but you value your money more than the chaos!
Here are the seven best low risk investments with virtually zero risk:
1. GIC Laddering
Guaranteed Investment Certificates (GICs) have become one of the best low risk investments among consumers of every stripe. While interest rates remain historically low, they are better than what they were a few years ago. As a result, financial institutions are following suit and doing what they can to offer competitive GIC rates of return on your deposits.
One way to get the best rates is through a GIC, preferably by an online bank that possesses superior rates to brick-and-mortar institutions. And, when you do delve into the world of GICs, be sure to ladder!
So, what is GIC laddering? This is a simple but effective way to maximise your return from your GIC investments without locking in all of your cash into one long-term investment. So, when you have a GIC that matures, reinvest the new amount (principal plus return) in a five-year GIC term. Rinse and repeat. You will not get rich overnight, but you can accumulate nicely from these low risk investments.
2. High-Interest Savings Account
Do you want the best low risk investments with zero risks? Well, consider a high-interest savings account. But how can you get one? Two ways: a tax-free savings account (TFSA) and an online savings account. With this low-risk strategy, you can just deposit money into your account every month and allow the returns to balloon. All the gains and none of the headaches.
3. Dividend Stocks
A lot of traders are always trying to find the next hot stock that will trigger huge gains. This can be hard because who knows how the market trades? There are so many publicly-traded businesses, plus it is a huge market. If you want to accrue a nice amount of positions over time, and you want to receive an income when you hit your winter years, dividend-paying value stocks are the best low risk investments.
A dividend is when the company pays a portion of the profits every month or quarter. So, for instance, Kramerica Industries will pay $0.23 per share every quarter. If you continue to add to the stock over time, you will have respectable monthly or quarterly income.
4. Mutual Funds
Mutual funds have been one of the best low risk investments for your typical investor for decades. It is essentially a compilation of stocks in a particular industry. Every mutual fund is different, but it is a great way to build investment income in a safe and managed way. Your financial institution offers dozens of different mutual funds that are tailored to your needs.
5. Credit Card Rewards
If you have a basic credit card that requires you to pay a $25 annual fee, then you are doing the whole consumer thing the wrong way. What you should be doing instead is getting your hands on a credit card that offers you rewards, preferably cash rewards. These are good low risk investments with practically zero risk.
These pieces of plastic do come with higher interest rates, but they are beneficial if you are not an impulsive shopper and you want to make money from spending.
6. Corporate Bonds
Corporate bonds over government bonds? Hear us out! The problem with government bonds these days is that they are flooding the multi-trillion-dollar market, and they also represent a majority of the negative-yielding wing of the industry. It can be hard to find even modest returns on a five-, ten-, or 30-year note. Plus, since the demand for these instruments remains high, interest rates are more than likely to come down even further.
While corporate bonds are still being issued at all-time highs, they pale in comparison to the government. So, that said, you can always acquire corporate bonds in a well-known company. Or, if you want to use a fund, here are some ideas:
- Fidelity Capital & Income Fund (FAGIX)
- Vanguard High-Yield Corporate Fund Investor Shares (VWEHX
- BlackRock High Yield Bond Fund (BHYCX)
- SPDR Bloomberg Barclays High Yield Bond ETF (JNK)
- iShares iBoxx $ High Yield Corporate Bond ETF (HYG)
7. Precious Metals
Whether you are interested in physical bullion or you want to own exchange-traded funds (GLD or SLV, for example), precious metals are a low-risk play because they protect your net worth from inflationary forces.
While it would be best not to put 80 percent of your portfolio into metals, a conservative ten percent can go a long way to shield your money from inflation.