Finding the right place to invest your hard-earned dollars may look easy for an experienced investor, but that’s definitely not the case when you are a beginner. There are several places where you can invest your money, but how can you choose when there are so many options?
Investing and generating high returns without losing money is something every investor strives to do. So, keep on reading to learn more about the three low-risk investment options you can do in 2019.
Top 3 Low-Risk Investment Options With The Highest Returns in 2019
The following three investment options rank at the top 3 in our charts. We will try to cover not only the advantages but disadvantages as well because you need to consider everything before investing.
Treasury Inflation-Protected Securities (TIPS)
Shortly, TIPS are a form of U.S. Treasury bond and the value of the treasury inflation-protected securities adjust up and down based on inflation.
According to Investopedia, “The principal value of TIPS rises as inflation rises while the interest payment varies with the adjusted principal value of the bond. The principal amount is protected since investors will never receive less than the originally invested principal.”
TIPS investors are also protected against inflation over the life of the bond. And once the bonds mature, the investors receive either the adjusted principal or the original investment.
Let’s take a look at the advantages and disadvantages of the Treasury Inflation-Protected Securities before you decide to invest.
- TIPS are indexed to inflation
- They have U.S. government backing
- TIPS pay investors a fixed interest rate twice a year
- Investors will never be paid less than the initially invested principal
- When inflation rises so makes the interest payments
- More diversified portfolio
- Low-interest rate
- Higher taxes
- Deflation can decrease the value of TIPS
Money Market Funds
Money market funds invest only in highly liquid instruments with a short-term maturity that is less than 13 months. In other words, money market funds offer high liquidity with a very low level of risk.
Money market funds invest in low-risk securities, such as U.S. Treasury bills, Certificates of deposit, and commercial paper. Some investors say money market funds are as safe as bank deposits, but they provide a higher yield.
Let’s take a look at the pros and cons of money market funds before you decide to put your money in these funds.
- Great rates for a low-risk investment
- Good for a short-term needs
- Money Market Funds give you the ability to write checks
- High Liquidity due to the fact that mutual funds can be bought and sold on any business day, so investors have access to their money
- Money Market Funds don’t require a minimum
- Money Market Funds have minimum investments
- You have to write big checks
- Rates move
Corporate Bonds (Corporates)
Corporate Bonds are debt obligations, or IOUs, issued by both private and public corporations. This way, companies raise money from investors. With the collected funds, the companies finance various business activities.
Investors get paid interest at regular intervals. In other words, by the maturity date of the corporate, a profitable return can be earned. So, let’s take into consideration the advantages as well as the disadvantages before putting your money in corporate bonds.
- Corporate Bondholders have higher priority than shareholders, and even if the company goes under, you can still recover the money you have invested.
- Corporate Bonds have a better return than other bonds
- Corporate Bond interest payments are structured
- Preservation and long-term accumulation of capital when reinvested
- Possible tax advantages
- Corporate Bonds can be traded
- Corporate Bonds are riskier than other bonds
- The value of the corporate bond is not designed to increase.
- Reinvestment risk
Now that you know what the three best low-risk investment options are, you have to consider whether you want to invest in a long period or a short period of time and if the time is right for investment.
If you are someone with a low-risk tolerance or someone who wants to make low-risk investments with high returns, then the Treasury Inflation-Protected Securities, the Money Market Funds, and the Corporate Bonds are you go-to for a low-risk investment with high returns. The higher the return you aim for and expect, the greater the risk that you have to accept.