By definition, investing is the act of setting aside money with the expectation of making profits or income. The main reason people invest is because they expect a return in the form of income. The extent of return an investor expects depends on the level of risk they are willing to bear. The lower the risk, the lower the expected return; and the higher the risk, the higher the expected return.
Low-Risk Investments
With this type of investment, your chances of losing the original amount of money you put in is very unlikely. This also means that you are very unlikely to earn high returns.
Below are places to find low-risk investments:
Banks
1. Savings Accounts
To have a savings account, all you need is to open one with your local bank. Banks have different rates of return (interest rates) that they provide their customers with. This also varies from country to country, with third-world countries having bigger rates than those of first-world countries.
These are low-risk investments because the amount of money you put in will not fluctuate unless you withdraw it from the savings account. The advantage of a savings accounts is that you have access to your money at any time.
2. Money Market Accounts
These are also offered by banks. They have a higher rates of return compared to savings accounts. Customers are, however, required to have a minimum balance before getting access to the high returns.
3. Certificates of Deposit (CDs)
CDs are issued by banks and have specific terms on their rates over different durations of time. You can, for example, have a five-year, one-year or six-month CD, each with varying rates. The downside to this kind of investment is that a penalty fee is applied if you withdraw money before the end of the contracted duration.
Governments
4. Treasury Securities
Governments issue different types of low-risk securities, including treasury bonds, TIPS, treasury bills and treasury notes, among others. All you have to do to start investing is open an account with your respective central bank and select whatever security you want and what rate you want.
Insurance Companies
5. Fixed Annuities
Insurance companies offer these low-risk investments by giving investors a contract that pays a fixed interest rate. Despite being a low-risk investment, these securities depend on the viability of the insurance company. You can lose all your money if you choose a lowly-ranked insurance company.
6. Immediate Annuities
These are also offered by insurance companies. As an investor, you are guaranteed a monthly amount of income. They are also associated with risks, just like fixed annuities, that depend on the type of insurance company you select.