The Best Low-Risk Investments for Beginners

While the global economy is recovering much faster than anyone could have expected, there may still be a few hurdles on the way in 2021. However, during the second half of 2020, the stock markets experienced a bit of a bounce, suggesting that investors should maintain their discipline a while longer. Furthermore, positive changes to the economy indicate that now is an excellent time for anyone to invest.

If you haven’t yet opened investments, low-risk investments are ideal for uncertain beginners. While even expert investors opt for low-risk opportunities to build and diversify their portfolios, having less-risky assets is a great way to ride out the market’s future volatility.

The only significant trade-off of low-risk investments is that, of course, with lower risk exposure, investors are only likely to receive smaller returns in the long run. However, this is just fine if your goal is preserving capital while maintaining a steady interest income flow.

While you should consider investment strategies that compliment your long-term goals if you’re after more growth, these are the best low-risk investments to consider in 2021.

Exchange-Traded Funds

ETFs or exchange-traded funds are low-risk investments, which holds a basket of securities such as stocks. Since their emergence back in 1993, this low-risk opportunity presents as the ideal alternative to mutual funds.

While ETFs are the ideal type of asset for investors to build and diversify their portfolios, there are a few unique risks to consider before investing. It is also necessary to view the specific taxation details when holding exchange-traded funds. However, EFTs are suitable low-risk investment opportunities even for novice investors.

However, it would be best if you still delved into a bit of research before investing in uncovering more details to understand even the basics, such as ‘what are exchange-traded funds‘ genuinely. Even less risky assets should be researched and understood before you buy-in.

High-Yield Savings

Savings accounts are not technically investments; high-yield savings accounts that require at least a one-month withdrawal notice period are a great way to start developing the discipline to invest money successfully.

The only considerable risk associated with using a high-yield savings account as a long-term investment is that inflation erodes the value of money, even though it does not lose its dollar worth. When it comes to finding a savings account that offers a higher interest return, it is best to compare lenders’ options online as different lenders will offer varying interest rates.

Savings Bonds

Savings bonds are similar to savings accounts, and while they are investments, they are more so savings instruments for investors. There are different savings bond types, as some pay interest for up to thirty years and a fixed return rate.

Others are a great choice of protection against inflation as the inflation premium is only revised twice-yearly. This type of investment comes with little to no risk, although they may also come with no return, indicating that the main risk is a potential loss of purchasing power.

Dividend-Paying Stocks

Stocks might not be as safe as cash or savings accounts, although they are much safer than the high-flier options. Dividend-paying stocks are investments that pay a portion of the companies profits by distributing them to investors regularly.

While all dividend stocks will offer different cash dividends, the main risk is that should the company experiences tough times and declares losses; dividends will be trimmed down or eliminated.

However, savvy investors can lower the risk by opting for companies with optimistic profit predictions. Because investing in dividend-paying stocks means that you can eventually rely on a substantial income flow from dividends, this low-risk investment can be undeniably rewarding, even for beginners.

Precious Metals

Precious metals such as gold and silver have long been considered safe-haven investments. As the stock market is affected by the growing economic uncertainty, investors opt for low-risk options such as these and other commodities.

Even though precious metal investments won’t offer fast growth, the market for precious metals has been thriving even before our currencies were created. The longevity of gold and silver indicates that holding wealth in gold and silver is extremely safe.

What’s more, the continuous growth of cherished precious metals suggests that long-term holdings will be rewarding and may remove the risk of inflation eroding the purchasing power of your money.

Mutual Funds

Mutual funds invest in short-duration securities. While even the best mutual funds offer only a small yield, they provide complete liquidity as they hold next to no volatility. This makes them perfectly ideal for beginner investors as the risk is entirely minimal.

What’s more, you will also be able to pull your investment out at absolutely any time, making them accessible investments as well. Mutual funds have also long been considered the ideal low-investment opportunity, so they are ideally safe for uncertain investors.

Fixed Annuities

Fixed annuities allow investors to pay an upfront lump sum that is exchanged for payments over time. They function similar to certificates of deposit as you are required to lock up access to your investment for a specific time, and you will receive a higher interest rate in exchange.

The interest rates of fixed annuities can vary from a modest 1.0% to a notable 3.5%. However, there are a few risks as you can incur penalties if you access your money before the investment’s maturity date has passed, although you may access a penalty-free percentage of your cash monthly in most cases.

Low-risk investments offer ideal investment security, and even though your returns will be modestly low, it is best to start investing with safe opportunities. As you develop your expertise, you will still want to hold onto your low-risk investments, even if they only serve as portfolio diversifiers.

Protecting wealth with safe investing is the expert investor’s choice. While you should always thoroughly research the pros and cons of any investment opportunity, most low-risk options are also quite simple to understand and monitor, which also renders them perfect for the novice investor.