There are many low-risk investment options available today. But before you can choose the best one, you need to know what you’re looking for. An investment is taxed in your hands and it can have a high return or bring a loss to your capital. You will realize that there are various risks involved in investing and here you will read the best low-risk investment options that give you better control over your money.
One of the world’s hardest jobs is making money from money. Investment is one of the best ways out there, which can literally do the same thing, i.e., make money from money. In today’s context, we have uncountable ways of investment, from age-old fixed deposits to the modern way of investment – crypto.
Not every way of investment path results in the same rate of returns. In most cases, the investment path with the least risk results in the production of the least returns, while investment ideas that include the most risk can give you way more returns.
The statement described above has been proved, and crypto is a vivid example. But, for several weeks now, the market is not as good as it should be. Inflation has hit the global market and the US market as well. The US market has fallen on its face unexpectedly. Currently, Dow Jones, the stock-market index, is down compared to what it was at the year-opening by almost 20%. Investors are continuing to lose money amid volatility.
As someone who doesn’t want to take this risk or will retire soon, it is better to protect their capital instead of investing and losing it. Here are the best ways of investing with the least risk.
Best Low-Risk Investment Options 2022
- Savings Account
- Fixed Deposits
- Mutual Fund
- Dividend-Paying Stocks
Let’s dive into detail.
Savings Account: Best Low-Risk Investment Option
A savings bank account has always been the best option for ultra-low risk seekers to invest their money & get a low amount of returns over a certain period. A savings bank account is one of those investment options that offer the best liquidity.
However, suppose you calculate the inflation of the current time. In that case, it turns out that the savings account generally lowers the invested amount if the ongoing inflations are redacted from the interest rate. It is included in this list as most savings bank accounts are regulated under strict rules by the government.
Fixed Deposits: Low-Risk Investment Option
Suppose some investment options continue to offer a certain percentage of interest on invested capital for longer. In that case, fixed deposits are the best options out there.
Why choose FD?
The best fact about fixed deposits is that the interest rate of FDs is between banks’ interest rate for savings bank accounts & stocks or ETFs. FDs include the best features of savings bank accounts (i.e., security of capital) & stocks (i.e., better returns). Considering the current inflation scenario, it can be concluded that keeping your capital in FDs will result in very little returns on your invested amount.
If you are looking for some way to grow your money, which is used by retail investors like you and me and big Asset Management Companies, nothing can be a better option than bonds. There are several types of bonds in which you can invest to earn a more rate of returns than even FDs.
Treasure bonds are security bonds that are issued by the central bank of the US and are fully backed by the government. It can also be a good source of annual income as the interest on the invested capital is paid twice a year. The main problem with these treasury bonds is that the maturity period for Treasury bonds is very long (20 years or even 30 years in some cases) & that’s why aged people don’t opt to go for treasury bonds.
There are two types of bonds. The first one, which we have already discussed earlier, is issued by the government while corporate companies issue corporate bonds. In this case, you are the lender, and this bond creates a deal between you and the company. The company borrows money from you, and that’s why it pays you the interest in return.
Considering the rate of reruns, corporate bonds beat government-backed treasury bonds. But, the security is undoubtedly better in treasury bonds.
Now the inclusion of mutual funds in the list of ‘Best Low-Risk Investment Options’ may sound somewhat awkward, but here it is to be remembered that there are not just one or two categories of mutual funds to invest in.
The first factor which makes mutual fund investment less risky than stocks is that in mutual funds, your money is operated by an expert. Well, that’s not what gives you the assurity that you will never lose your money by investing it in mutual funds. In fact, history has also proved that equity mutual funds have underperformed compared to equity stocks randomly selected by investors with no prior experience.
Now let’s talk about something totally different from equity funds and involves low risk. A debt fund is one such kind of mutual fund which includes lesser risk. In debt funds, your investment is your money, and the asset manager uses the collected capital and pays debt to banks / corporate houses. As these organizations have taken your money as debt, they are liable to pay you interest for using your money. That’s why the returns of debt mutual funds are almost certain.
If you want to stick to stock and take a bit more risk by investing in equity stocks and still want to take low risk, dividend-paying stocks are considered among the best stocks to give you at-least dividends even when the stock market is falling.
Before buying a dividend-paying stock, check whether the stock has been giving dividends a number of times in a year or not. It is also extremely necessary to check the company’s finances and do a basic fundamental analysis of the company to invest in it.
Why Should We Choose Dividend-Paying Stocks As Best Low-Risk Investment Options?
Dividend-paying stocks try to offer their shareholders a part of their income as dividends, regardless of the action in their stock price. So if you have some quality dividend stocks in your portfolio while there is a severe condition going on in the market, you can still earn a small amount of money in the form of dividends.
So these are the best methods to invest in the current situation when the stock market is badly affected by several internal and external factors. We have made a list keeping in mind the need to gain your money, as well as the need to protect your money.
The list has been made in such a way that we have included the lowest risk investment option at the beginning, and the risk factor has just increased as the list has been processed. You can comment on your views using the comments feature if you have additional queries regarding any investment ideas we have listed here.