10 Best Investments (2023 and Beyond)

10 Best Investments (2023 and Beyond)

10 Best Low-Risk and High-Return Investments for 2023 and Beyond

Not to fearmonger, but experts are suggesting that the U.S. may be headed towards a recession in 2023 due to high inflation and an increase in interest rates by the Federal Reserve. While this may cause concern for investors, there are still opportunities to weather market volatility and seek some stability by diversifying portfolios with low-risk and high-return investments.

High-Yield Savings Account

To start, let’s cover the safest option available: high-yield savings accounts. These accounts are insured by the federal government and offer a higher interest rate than the national average, making them appealing to many people. With most of these accounts earning between 0.40% and 0.50% annual percentage yield (APY), they provide a significant rate without requiring much effort. Opening an account online with Chime, Marcus, Alliant, Discover, or Varo is simple and convenient. Even though it may not offer much excitement, a high-yield savings account can provide better returns compared to traditional savings accounts.

Certificate of Deposit

For a guaranteed return on your investment, a Certificate of Deposit (CD) may be the way to go. CDs involve depositing money for a specific period of time, usually ranging from 3 months to 5 years. The longer the duration of the CD, the higher the interest rate. It’s important to purchase CDs from FDIC-insured financial institutions to ensure the safety of your investment. Some popular options include the 11-month No Penalty CD from CIT Bank, which offers a competitive return of 4.15%.

Short-term Bonds

Short-term bond funds are another low-risk investment option. They invest in securities that mature within 1 to 3 years, including government bonds and commercial papers. Short-term bonds are considered less sensitive to market fluctuations than long-term bonds, making them attractive to risk-averse investors. These bonds can provide higher yields than money market funds, ranging from 0.5% to 1.5% or more. However, it’s important to note that investing in short-term bond funds carries the risk of losing principal.

Series I Savings Bonds

Series I savings bonds are issued and backed by the U.S. government, offering a safe investment option. These bonds pay interest monthly and have a fixed interest rate combined with a variable interest rate that is adjusted to inflation. While the current interest rate is 4.30% until October 2023, the bonds continue to earn interest for 30 years. Keep in mind that cashing them in before their expiration date may incur an interest penalty of three months.

Dividend Stocks

Investing in dividend stocks is a way to achieve long-term growth while reducing relative risk. Dividend stocks are investments in companies that regularly pay dividends to shareholders. These stocks can enhance the stability of your portfolio, as dividend-paying companies are often well-established and considered low-risk investments. For example, Texas Instruments, known for manufacturing calculators, is the world’s largest manufacturer of analog chips. With a steady increase in dividend amount and a positive outlook for future growth, investing in dividend stocks may be a lucrative option.

Annuities

Annuities are often misunderstood due to misconceptions perpetuated by unscrupulous financial advisors. However, they can be a solid option for investors seeking long-term stabilization within their portfolios. Annuities are complex financial instruments that offer guaranteed returns. There are different types of annuities available, such as fixed annuities, variable annuities, and equity-indexed annuities. It is crucial to understand how each type works before making a decision. Fixed annuities, like the ones offered by Due, can provide a stable monthly return of 3%.

Real Estate

Investing in real estate is often seen as a high-risk venture. However, there are low-risk options available, such as Real Estate Investment Trusts (REITs) through ETFs. Fundrise, an online platform for crowdfunding REITs, provides a hassle-free way to invest in a well-diversified portfolio of commercial, condos, single-family homes, and multi-family properties with a minimum investment of just $10. By allowing the Fundrise team to manage your investment, you can enjoy potential returns without the hassle of being a landlord or handling repairs.

Money Market Funds

Money market funds are mutual funds designed to protect your principal from losing value. These funds aim to maintain a Net Asset Value (NAV) of $1 per share and offer a little return on investment. While there is no guarantee, money market funds have a strong track record of protecting investments. They are accessible through trusted brokers like TD Ameritrade, Ally Invest, and E*TRADE, as well as through banks that offer high-interest savings accounts. While the interest earned may not be substantial, the stability and protection they offer make them an attractive low-risk investment option.

Treasury Inflation-Protected Securities (TIPS)

TIPS are U.S. Treasury bonds specifically designed to protect investors from inflation. These bonds can be purchased in $100 increments, offering a fixed interest rate combined with government-guaranteed inflation protection. While the current interest rates for TIPS may be lower compared to other options, their value grows with inflation, providing a higher return over the bond’s lifespan. Investors can purchase TIPS individually or invest in a mutual fund that provides exposure to a diversified basket of TIPS.

Investing in Yourself

Investing in yourself is a low-risk, high-return investment strategy. By prioritizing personal growth, education, and self-improvement, you can enhance your skills and knowledge, leading to long-term financial success. Reading financial books, taking online courses, or consulting with a financial planner can improve your financial literacy and help you make better investment decisions. Additionally, investing in your mental, emotional, and spiritual well-being can have a positive impact on your overall happiness and success.

Overall, while the looming possibility of a recession may be concerning, there are still opportunities for investors to mitigate risk and seek stable returns. Consider diversifying your investments with the 10 options mentioned above, based on your financial goals, risk tolerance, and personal circumstances. It is always recommended to do thorough research and consult with a financial advisor to make informed decisions that align with your investment objectives.

FAQs

What are low-risk investments?

Low-risk investments are those with little chance of losing money. While they offer lower returns compared to riskier options, they are considered safer investments that protect capital. Examples of low-risk investments include high-yield savings accounts, series I savings bonds, short-term CDs, money market funds, and Treasury securities.

Are there any low-risk investments that offer high returns?

Investing in low-risk options can still provide decent returns. Some low-risk investments that offer potentially higher returns include high-yield savings accounts, series I savings bonds, short-term CDs, money market funds investing in short-term debt, and Treasury securities.

What are the risks of low-risk investments?

While low-risk investments are relatively safe, they still carry some risks. Inflation can erode the purchasing power of investments over time. Interest rate risk arises when investing in a changing interest rate environment. Liquidity risk refers to the difficulty of accessing invested funds quickly. It’s essential to consider these risks before making any investment decisions.

How do I choose the right low-risk or high-return investment?

Choosing the right investment depends on various factors, including your financial goals, risk tolerance, and investment horizon. Setting clear goals, understanding your risk appetite, diversifying your portfolio, and conducting adequate research are all crucial steps. It’s advisable to consult with a financial advisor to receive personalized advice tailored to your specific circumstances.

Published First on Due. Read Here. Featured Image Credit: Photo by Tima Miroshnichenko; Pexels; Thank you!