Investing With Low Risk and High Rewards

Why is investment scary?

Investing is putting money toward something like a stock, bond, real estate, or something else with the intention to increase the value of the money you invested over time.

The majority of people are afraid to invest because returns are not guaranteed. One would rather have their money saved up in the bank where they are sure of its availability than in an investment whose returns are uncertain. 

One way to ease your fears of investment is to do it and seek the guidance of a financial expert for whatever investment you would like to make because the right investment steers you on the right path towards your financial goals 

So what investments are not scary hence less risky?

Low-risk investments are because they offer peace of mind because they are structured so you are unlikely to lose money when you invest them. 

Here are a couple of popular of low risk-investments in you can look into this year:

• Treasury Bills

These are short-term securities, which have shorter maturities than bonds and notes. Certain types of T-bills have a few days to maturity, but they're usually issued in terms of four, thirteen, twenty-six, or fifty-two weeks.

T-bills have a face value, such as $1,000, $5,000, or $10,000, but you can usually get them for less than that. The amount you pay is referred to as the discount rate. When the securities mature, the government pays the entire amount of the bill.

• Dividend-Paying Stocks

Dividend stocks are thought to be safer than high-growth stocks because they pay cash dividends, which help to limit volatility but do not eliminate it entirely. As a result, dividend stocks fluctuate with the market but may not fall as far when the market is down.

All of these are extremely liquid securities that can be purchased and sold directly or through mutual funds.
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• Fixed annuities

An annuity is a contract, usually made with an insurance company, that promises to pay a set amount of money over a set period of time in exchange for an upfront payment. The annuity can be structured in a variety of ways, such as paying over a set period of time, such as 20 years, or until the client's death.

A fixed annuity is a contract that promises to pay a set amount of money, usually monthly, over a set period of time. You can contribute a lump sum and start receiving payments right away, or you can pay into it gradually and have the annuity start paying out at a later date (such as your retirement date.)

A fixed annuity can provide you with a guaranteed income and return, providing you with greater financial security, especially when you are not working. An annuity can also provide a tax-deferred way to grow your income, and you can contribute an unlimited amount to the account. Depending on the contract, annuities may also include additional benefits such as death benefits or minimum guaranteed payouts.

• Preferred Stocks

Preferred stock functions similarly to a hybrid of stocks and bonds in that it provides some of the potential for appreciation of common stocks while also providing the dependable income payments of bonds. In fact, preferred stock frequently pays out higher dividends than corporate bonds because, unlike bonds, payment is not completely guaranteed.

Since 1900, preferred stocks have provided annual returns of more than 7%, the majority of which have come from dividend payments.

In addition to dividends, a buyback may increase the value of your investment. Many companies have recently bought back preferred shares, usually at a slightly higher price than they were sold for, because preferred stocks pay higher dividends — and thus cost companies more — than corporate debt.

• Money market accounts

A money market account may have the appearance of a savings account and provides many of the same benefits, such as a debit card and interest payments. A money market account, on the other hand, may have a higher minimum deposit requirement than a savings account.

Money market account interest rates may be higher than savings account interest rates. In addition, you'll have the freedom to spend the money whenever you want, though the money market account, like a savings account, may have a monthly withdrawal limit. You should look for the best rates here to ensure that you're getting the most out of your investment.

• Series I savings bonds

A Series I savings bond is a low-risk bond that adjusts for inflation, thereby protecting your investment. When inflation rises, the bond's interest rate rises with it. However, when inflation falls, so does the bond's payment. The Series I bond can be purchased from TreasuryDirect.gov, which is run by the United States Department of Treasury.

The Series I bond's payment is adjusted semi-annually based on the inflation rate. With the high inflation levels expected in 2021, the bond is paying a sizable yield. If inflation rises, this will be adjusted upward. As a result, the bond helps to protect your investment from the ravages of rising prices.

Should you invest with the hope of paying out debt?

Navigating paying off debt while investing is not a one-way street because both are demanding financially. 

Looking to balance both requires for you to critically analyze both sides because focusing too much on investing can have you neglect to pay off your debt and having all your focus on paying off your debt can affect whatever investments you would like. 

This is why the help of a financial advisor is important because he/she will help create a plan for you and assess the interest on your investment or debt. 

At It’$ My Money, we are always sure to align you with the best experts and we spoke to  Tonio Mckinley founder of Incisive Investments who knows a great deal about making risk mitigated investments and how one can earn higher returns from a minimum investment of $500.

He weighed in with great financial advice in our latest episode of The Money Exchange Podcast.

​Take a listen!

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