The 7 best low-risk investments in 2023 (2023)

When markets are volatile, many investors look for low-risk investments to make this possiblekeep more of your hard earned money. If you want to reduce your risk, read on.

Which investments are low risk?

When people talk about low-risk investments, they usually mean investment vehicles where you will lose nothing or very little of your investment.

Here are some low-risk investments worth considering right now:

1. high-interest savings accounts
2. money market accounts
3. Deposit certificates
4. Series I capitalization bonds
5. Bonds, banknotes and treasury bills
6. permanent pensions
7. corporate bonds

These investments may not yield large returns, but most or all of your capital will remain intact.

The 7 best low-risk investments

Here's a closer look at some low-risk investments worth considering right now.

1. High Income Savings Accounts

Ahigh-interest savings accountan online or physical bank is a safe place to put your money. Interest rates are still low, but rising. However, be sure to shop around for the best rate. May 24, 2023 atBank of America, a member of the FDIC, paid an annual percentage yield based on aggregated account balances.allied bank, which is only available online, paid the APR on the same day.

2. Money market accounts

AMoney Market Accountit is similar to a savings account and can also write checks. Money market accounts, like savings accounts, are usually insured by the FDIC - or, if you get them from a credit union, by the NCUA. This means that even if your bank or credit union fails, your money is protected by the US government.

Interest rates on money market accounts are usually similar to interest rates on savings accounts.Bank CITdeposited into his money market account on May 24, 2023, with a minimum initial deposit of $100.

3. Certificates of Deposit

Adeposit receipt, or CD, is purchased from a bank or credit union, so it is also insured by the FDIC or NCUA.CDsoffer a fixed interest rate for a certain period of time. Typically, the interest rate is higher if the term is longer, but sometimes the difference can be quite small. With interest rates rising, it's probably best to buy a short-term CD if you go that route. You don't want to be stuck with a five-year-old CD paying 3% if the rates are 5% per year from now on.

4. Series I Savings Bonds

Series I capitalization bondsare issued and supported by the United States government. They pay interest every month. The interest rate is a combination of a fixed interest rate and a variable interest rate based on inflation, which is calculated twice a year. Until the end of October 2023, the interest rate is 4.30%. Savings bonds continue to pay interest for 30 years, although they can be redeemed within one year from the date of purchase. If you cash them in before the five years are up, you'll pay a penalty of three months of interest.

5. Bonds, bills and treasury bills

Measure commitments, notes and bank notes are debt issued by the United States government. By purchasing them, you are essentially lending money to the government, which agrees to pay you back with interest.

The difference between bonds, notes and bills of exchange is the term. Treasury bills are short-term bonds with a maturity of up to one year.

When you buy Treasury bills, you buy them for less than face value. When it expires at the end of the term, you get the face value. For example, you can buy an annual Treasury bill of $100 face value for $95. A year later, it will mature and you will receive $100.

Treasury bonds and Treasury notes work a bit differently. Treasury bills have maturities of two to ten years and Treasury bonds have maturities of more than ten years. They pay a fixed interest rate twice a year and on maturity they pay the face value.

6. Fixed annuities

The U.S. Securities and Exchange Commission describes arentaas an agreement between you and an insurance company whereby you make a lump sum or series of payments. In return, the insurer undertakes to make periodic payments to you. They can start immediately or in the future and will last for a certain period of time - for example, 10 years, 20 years or a lifetime.

A fixed annuity has a fixed interest rate, and the insurance company must pay out at least that rate as your account grows. The amount and frequency of periodic payments is also determined in advance. The interest and payment amounts specified in the contract are guaranteed as long as you hold the annuity to maturity.

Fixed-rate annuities are the lowest-risk annuities, so they generally offer the lowest returns. However, you may earn more than the minimum if the insurer's investments perform better than expected. And if they don't, the insurer covers the loss. In any case, annuities providePredictable and guaranteed incomein retirement, with almost no risk of losing your invested money.

7. Corporate Responsibilities

Just as the US Treasury issues bonds to raise money, corporations issue bonds. They are riskier than US bonds because there is always a risk that the company will go bankrupt. However, if you do, bondholders are paid before shareholders, just like corporate bondsless risky than stocks.

corporate bondsthey are issued with a face value or face value, which is the amount that the company must repay. The face value is usually $1,000, but the bond may sell for less or more than that amount.

Bonds also have a maturity date, which is the time before the bond's maturity date, and a coupon rate, which is the rate of interest the corporation will pay to the bondholder over the life of the bond. Interest is paid semi-annually.

A bond can be sold above or below its face value, but an investor can compare the bonds by looking atgive way to maturity. This is the annual return on the bond's face value if you hold it to maturity and is calculated using a formula that takes into account the coupon rate, face value, price paid and maturity date.

Here's an example: if you pay $1,000 for a $1,000 bond with a maturity in 10 years and a coupon rate of 4.00%, you earn $40 in interest per year - paid as $20 every six months because interest on the bond is paid twice times a year. year. Since the bond was sold at par, the yield to maturity is 4%, which is equal to the coupon rate. If you paid $900 for the bond, you would still earn 4.00% interest per year, but since you bought the bond at a discount, the yield is higher - in this case, 5.31%.

On the other hand, if you pay $1,100 for this bond, your yield to maturity will be 2.84%. You'll earn the same $40 in interest each year, and you'll earn $1,000 at maturity, but you paid more for the bond when you bought it, so your yield is lower.

What is the safest investment with the highest return?

investing isall about risktherefore, the safer the investment, the lower the return. As an investor, it is important to understand how much risk you are willing to take. You also need to think about whether you might need access to your money.

If you absolutely do not want to lose a penny of your capital under any circumstances and want to be able to withdraw money when you need it, look for a top money market orSavings Accountrate you can find.

Are there risk-free investments?

If you ask this question to a group of people, some of them may say, "Money in the bank" or "Put it on the mattress." But even that is not entirely risk-free. Are you still exposed toinflation risk, for example, which means the risk of inflation rising faster than the interest or other income you earn on your investment. While you may not notice your balance shrinking, your real purchasing power is eroded.

Here's an example, let's say you have $1,000 in a savings account that pays 2% interest. After one year, you'll have $1,020. But if the cost of groceries went up from $100 to $103 a week, you've lost your purchasing power.

The best low-risk investment is one that helps you sleep at night. If you're awake and thinking about losing money, it's time to switch to lower-risk investments.

Daria Uhligcontributed to this article.

Prices are subject to change; unless stated otherwise, rates are periodically updated. All other account information is correct as of May 23, 2023.