Three Lower Risk Investments for Future Planning


There are a number of reasons for low risk, long-term investments that slowly accrue profits over time. If you don’t need fast returns, lower risk investments are one of the best ways to plan for your future.

College planning and retirement planning are two of the most common reasons for long-term investment, and low risk investments can help augment an initial amount with additional income by the time college funding or retirement comes.

Here we cover three common, low risk investments to help you plan and put away money for the future.

Certificates of Deposit (CDs)

Certificates of deposit, commonly known as CDs, are one of the lowest risk investments you can make, and are also one of the simplest to understand.

Most banks, credit unions, or investment brokers provide the option to invest in CDs. The investment is incredibly simple. You deposit your money for a certain amount of time with the CD provider, and that money in turn collects interest for that predetermined amount of time.

When you choose a CD, you will lock in the amount of money you wish to deposit, the interest rate it will earn, and the amount of time you wish to invest. The interest rate is set and will not change, no matter what. Generally, the longer you opt to keep that money in the CD, the better interest rate you will earn.

CDs are so low risk because if you get one with an FDIC-insured organization, you are guaranteed that your investment will be returned, plus interest (up to $250,000 in initial investment). The drawback is that you pay steep penalties in earned interest if you need to withdraw this money at any time – so you should be sure you won’t need the cash during the amount of time it’s in the CD.

Treasury Inflation-Protected Securities

The U.S. Treasury provides lower risk bond investments, known as Treasury Inflation-Protected Securities, or TIPS.

These are bonds that have a measure to guard against inflation – whatever rate inflation grows during the time of your TIPS, your investment’s value matches. In addition, they grow at a flat rate of interest, much like a CD. They come in 5, 10, and 20 year terms, and can be bought through a broker or straight from the government.

Savings Bonds

These investments are similar to TIPS but they are backed up by the federal government and are a very low-risk investment. There are two types of savings bonds.

Series I bonds have fixed interest rate returns and inflation-linked returns – similar to TIPS.

Series EE bonds have a fixed interest rate only and offer fairly low rates of return. However, the Treasury guarantees a doubling of the bond’s value if it is held for 20 years. Cashing bonds out before maturity will get you the principal and accrued interest minus early withdrawal fees.

If you’re ready to start investing and preparing for your future, but don’t want to shoulder increased risks associated with the stock market, these options are a good place to begin. Saving money and investing isn’t easy – but the earlier you get started, the more of a return you can have in the long run.

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