The idea of low-risk investment itself gives a relief that the money invested is secured. Especially for the ones who are investing for the first time. Everyone wishes to have a good return even though they are investing a small sum of amount.
Getting a higher rate of interest on your investments can be great as you can get closer towards your goals. But the risk involvement also increases as you get higher interest returns. If you are close to your retirement the risk involved is low. But in case if there is a drop in the market rate, it can be extremely risky for you.
There are a variety of options when it comes to low-risk rate involvement. Below are some low-risk investment options:
- Credit card rewards:
You might know that credit card provides a low-risk return, but that’s not how it actually works. You earn a point when you get a hand over cash back credit cards and these points get converted into money. These rewards provide you with profit more than you would ever earn through savings.
- Certificates of Deposit:
If you are looking for a low-risk investment in the market, then Certificate of Deposit can be the best option. Banks, credit unions and also your investment broker can offer you with Certificate of Deposit. In Certificate of Deposit (CD) you need to deposit your money for some specific time span and in exchange, you get a guaranteed return on your fund.
You also get a specific rate of interest for certain time period that is not modified despite a change in interest. You are provided with an option of withdrawal before the period of maturity only when you pay a penalty that is worth the 3-month interest rate. Also, you are stuck in CD until the date of maturity. The interest you earn is usually depended on the span of the CD. Generally, the interest rates are very low but it can increase if you extend CD term by 1-2 year.
- Treasury inflation Protected Security (TIPS):
Treasury Inflation Protected Security (TIPS) is one of the lowest risk-involvement options which you can go for. TIPS is divided into two i.e. fixed interest rate and built-in inflation protection. In fd interest rate remains unchanged despite the time period of the bond. Whereas in built-in inflation protection the bond is guaranteed by the government. The investment value rises according to the TIPS you have purchased during the time of inflation.
You can either invest in a mutual fund that invests in TIPS or purchases the TIPS individually. The first options allow you to manage your FD investment whereas the other one gives you freedom to choose the TIPS of your choice.
- Money Market Fund:
If you don’t wish to lose any principal on your investment than this can be just the right option for you. The fund ends up paying you a very little interest rate which can help you make your funds more meaningful. The fund goals in upholding a Net Asset Value (NAV) up to INR 65 per share. The funds are not assured able but they come with a strong lineage in protection with the value of the cash. There is a possibility that NAV can drop below the given rate.
- Municipal Bonds:
Governments don’t use credit cards when they need finance instead they opt for issuing municipal bonds. These bonds can be helpful for the ones who are looking for minimizing their taxes. Before investing in a municipal bond it’s necessary to have a word with your accountant making sure that the bond is excused in your state.