14 Safe Investments With High Returns
One of the goals of investing is to earn the highest return possible without risking too much capital. Identifying reliable investments that also have the opportunity for high returns could help achieve that goal. While most investments carry some degree of risk, there are types of investments that are considered less risky in relation to the others. Learning how to identify safer investments with higher returns can help investors create a diverse portfolio with a good mix of investments.
- A safe investment is one that has no to low risk.
- A high return is one that produces a significant return in relation to the investment.
- Many different factors, including U.S. and foreign economy, go into determining risk.
- Some of the safest investments include high-yield savings accounts and savings bonds.
What Is a Reliable Investment?
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A safer investment is an investment that carries little risk compared to others. This may include investments that are FDIC-insured or ones that have a high likeliness of a return on investment (ROI). The level of risk can determine how safe an investment is, including:
- No-risk: No-risk investments mean investors won’t lose anything. Most investments carry some degree of risk.
- Low-risk: Low-risk investments mean the investment is mostly free of risk.
- Moderate risk: Moderate risk investments mean there is some degree of volatility, leading to risk.
- High-risk: High-risk investments refer to investments that are risky, either highly volatile or with little evidence for return.
Sometimes, low-risk investments mean a low return on investment. Consequently, high-risk investments can have a high ROI. Investors should find a balance of risk and return that meets their comfort level.
What Is a High Return?
A high return refers to a significant amount of revenue in return for an investment over a specific period of time. Investors often aim for the highest return possible, but it is not always clear which investments provide the best returns. What is considered a high return can also be a subjective term, so investors may need to determine their high-return points.
What Factors Affect an Investment’s Risk?
Many factors go into determining the risk of an investment, including:
- Current domestic economy:The U.S. economy directly affects many types of investments.
- Current international economy: Foreign country economies can also have a direct or indirect impact on certain investments.
- Politics and policy changes: Policy and legislative changes can impact how a business operates, thus affecting certain investments.
- Insurance eligibility: Investments that are FDIC-insured tend to be less risky.
- Interest rates: Interest rates can affect a business’s bottom line, also impacting the return on certain investments.
- Investment performance:Investment performance, including when the investor buys and sells, can also impact overall risk.
When determining how much risk to take, investors should consider their own assets, short- and long-term goals, and the history of the individual stock. It is also necessary to consider the liquidity of available assets. Some investments permit investors to withdraw funds as needed without penalty. Others, like money markets and treasury bonds, require investors to let the funds fully mature before cashing out. While liquidizing these funds prematurely may be possible, there is often a penalty.
What Are Some Safe Investments With High Returns?
While no investment is 100% safe, some investments are considered less risky than others. These are a few of the top reliable investments with high returns:
- High-yield savings accounts: Investors can usually expect somewhere up to a 2% return in high-yield savings accounts. High-yield savings accounts are also FDIC-insured, meaning investments are safe. Although they over a minimal return than when compared to other types of investments, the low-risk makes them a popular investment. Additionally, different banking institutions offer different rates of return, meaning investors can choose one that works for them.
- Savings bonds: Savings bonds pay a fixed interest rate on investments. Some savings bonds are also tax-exempt, making them a more desirable option for many.
- Certificates of deposit (CDs): CDs offer slightly higher returns than high-yield savings accounts. There is some degree of risk because if investors withdraw money early, they could be penalized.
- Corporate bonds: Corporate bonds come with slightly more risk in return for the chance of a slightly higher return. Investing in high-profile corporations usually provides investors with some return. However, it is always possible to lose money, especially if interest rates increase or the business goes bankrupt.
- Money markets: Money markets work similarly to savings accounts. They tend to offer a higher return as long as investors let the money mature.
- Treasury securities: Treasury securities are also FDIC-insured. They are a form of investment offered by the government to fund projects. However, they also have maturity dates, and cashing in too soon can lead to financial penalties. Treasury securities come in the form of treasury bills, notes, or bonds.
- Municipal bond funds: Municipal bond funds are offered through the state or local government and are tax-free. This means that investors can avoid federal taxes on returns.
- Dividend-paying stocks: Dividend-paying stocks offer regular returns on scheduled intervals. Investors can then cash out these returns, or reinvest them in additional stocks.
- S&P 500 index funds/ETFs: S&P 500 index funds are a combination of the 500 biggest companies in the U.S. The diversification of the different funds typically offers a lower-risk investment.
- Real estate investment trusts (REITs): REITs are a good way to invest in the real estate market with limited capital and risk. Additionally, investors have the option to choose between different types of REITs, including residential or commercial properties.
- NASDAQ 100 index fund: The NASDAQ 100 is a list of the top 100 companies. This investment offers a reduced risk because these companies have already proven to be somewhat successful.
- Industry-specific index fund: Industry-specific index funds let investors purchase a collection of multiple investment funds within a specific industry. Investors can also gain experience in this specific industry, thus helping them maximize profits and reduce risk.
- Annuities: Annuities are investments with an insurance company. Annuities are available as either a fixed amount or a variable amount. Investors make one-time payments or regular payments to the company, and the company pays the amount back with interest.
Some investment experts also recommend paying off debt as a safe investment that offers a high return. While it is not technically an investment, paying down high-interest credit cards and loans can save investors a significant amount of money. This money can then be invested in other high-return investments. Additionally, there is no risk of paying off debt. When choosing which debts to pay off first, it is important to look at the interest rates. Many people try to pay down loans or credit cards with higher interest rates first.
While the majority of investments come with some degree of risk, there are investments that are relatively safe. Investors should consider their own assets and goals when choosing which investments to pursue. Certain investments, like CDs and money markets, are a good option for investors who want safer options. Other investments come with increasing degrees of risk as well as a higher return on interest.