11 Best Low-Risk Investments for 2024: Safest Investments With the Highest Returns | Stash Learn

11 Best Low-Risk Investments for 2024: Safest Investments With the Highest Returns

By: Team Stash• Reviewed by: Heather Comella

Published: Feb 09, 2024

• Updated: Aug 27, 2024

In the face of high inflation and rising interest rates, many investors are turning to safer low-risk investments to ease the stress of a volatile market. Low-risk investing means buying assets that are less likely to incur significant losses than more unpredictable stock picks. Low-risk investment options can include cash management accounts like certificates of deposit, Treasury securities like Series I bonds, and even stock options like preferred stocks.

Ultimately, choosing from the investments below will depend on your goals, time horizon, and risk tolerance. If it’s high growth you’re after, consider investing in riskier assets like dividend stocks for a longer period of time—at least five years or more. This gives you enough time to ride the ups and downs of the market while still realizing higher returns over time.

Let’s get into it.

1. High-yield savings accounts

Best for: investors with short-term financial goals or who want access to cash

A high-yield savings account (HYSA) is much like a traditional savings account, but it pays more in interest. These accounts are insured by the Federal Deposit Insurance Corporation (FDIC), so you can count on your funds being protected even if the bank were to fail.

Since high-yield savings accounts generally allow you to access cash when needed, they’re a good investment vehicle if you may need access to cash in the near future, or if you’re working toward short-term goals like building up an emergency fund. A high-yield savings account can yield attractive returns hovering around 4.5% – 5%.

2. Certificates of deposit (CDs)

Best for: investors who need money at a specific future date

A certificate of deposit (CD) is essentially a loan you extend to the bank—your deposit earns interest for a set amount of time, generally at a higher rate than a traditional savings account. CDs are also FDIC-insured, so they won’t dip below the dollar value you purchased them for.

They’re sold in various term lengths, from a few months to two years. This makes them a good option if you have a large upcoming purchase in the near future.

3. Money market funds

Best for: investors who want full liquidity

Similar to how index funds are baskets of multiple stocks and bonds, a money market fund is a basket of CDs, bonds, and other low-risk assets within a single fund. While it’s technically possible to lose money on your investment, it’s rare.

4. Money market accounts

Best for: risk-averse investors who want to maintain liquidity

Money market accounts are similar to CDs or savings accounts—they’re a type of federally insured bank account, but they offer more ways to withdraw or spend directly from the account.

5. Treasury bills, notes, and bonds

Best for: investors who need to balance their portfolio with low-risk assets

Treasury securities are like CDs in that your investment functions as an interest-earning loan, but you’re loaning to the government.

The main difference between Treasury bills, notes, and bonds is the term length:

Treasury bills: term length of one year or less
Treasury notes: term length of 2, 3, 5, 7, or 10 years
Treasury bonds: term length of 20 or 30 years

6. Series I bonds

Best for: investors who want to protect against inflation and can hold their investment for at least five years

Series I bonds are a type of low-risk bond issued by the U.S. Treasury. Unlike a traditional bond, I bonds have two interest rate components:

Fixed rate: base rate that resets twice per year
Inflation rate: inflation-adjusted rate that resets every six months

7. Corporate bonds

Best for: investors interested in bonds with a slightly higher yield than Treasury bonds

Like other bond investments, corporate bonds are subject to fluctuating interest rates.

8. Dividend-paying stocks

Best for: investors who are willing to stomach more risk and want fixed income

While dividend stocks can provide a dependable source of fixed income, there’s also the chance that a company might underperform. To mitigate this risk, look for stable companies with a strong track record of consistent growth.

9. Preferred stocks

Best for: investors who want fixed dividend payments that are higher than bonds, but for less risk than common stock

Preferred stocks are akin to owning a long-term bond and offer set dividend payments.

10. Fixed annuities

Best for: investors seeking a dependable income stream to fund a portion of their retirement

Fixed annuities are a contract between you and an insurance company, offering regular payments over a set period of time in exchange for a lump sum upfront. However, it’s important to understand any fees associated with the annuity product.

11. Index funds

Best for: long-term investors who can stay invested for a decade or more

An index fund is a basket of securities that track a specific index. Investing in an index fund allows you to invest in hundreds or thousands of different companies in one fund.

It’s important to remember that any low-risk investment means trading higher speculative returns for lower guaranteed returns. The suitability of any of the investments above depends entirely on your goals, time horizon, and risk tolerance.