Smart Money: Four Great Low Risk Investments

Smart Money: Four Great Low Risk Investments

The idea of investing your money can be pretty daunting. The image of enormously wealthy people putting down millions on risky ventures springs to mind. Luckily that’s not exactly accurate. It certainly happens, but most investment takes place on a much more realistic scale. It’s also worth remembering just how many different varieties of investment there are. They vary wildly regarding risk, reward and necessary financial commitment. Which one you decide one will depend entirely on your financial and personal circumstance, your age and a whole host of other factors. If you’re set on getting into the world of investments then here are some of the best options that you should consider.

Peer-to-peer lending

This is a type of investment that a lot of people don’t realize but that can be extremely profitable. Peer-to-peer lending means that instead of buying shares in a company you’re lending your money to someone else in hopes of a return. Now I know you may be thinking that this sounds extremely risky. And there’s a chance it could be if you don’t screen your loans properly. Fortunately, peer-to-peer companies offer ways to screen your loans carefully. If you’re sensible and screen effectively, this is one of the best low-risk/high-reward investments there is. Especially in the short term.

Real Estate

Real EstateĀ is one of the most common investments out there and with good reason. It’s consistently shown to be a reliable and profitable investment. Of course, it comes with its own share of risks and responsibility. A lot of people don’t want to deal with the work that goes into private real estate investments. Being a landlord could well feel like a full-time job on its own. Something like a REIT is a great way of making more low-risk, passive investments in real estate.

Certificates of deposit

If you’re looking for a seriously low-risk investment, then look no further. The trade off is certificates of deposit might just be the most boring method of investment possible. Certificates of deposit mean that you simply deposit your money for a set period in exchange for the guarantee of a return on your money. There’s a set interest rate for that period, and you will be charged for withdrawing early. Your return is pretty much set from the start, so it does lack some of the excitement and potentially high rewards of other investments. But if you’re happy to trade off modest rewards for a significantly reduced risk then this type of investment is perfect.

Municipal bonds

If you want to minimize your exposure to taxes, municipal bonds are ideal. Municipal bonds are when your government needs to borrow money on a local level. Because these are bonds issued by the government the chances of the borrower defaulting are extremely low. Compared to other, similar risk, investments, the lack of income tax on them helps to ensure a higher return. If your government does need to pay off old debt, they will often raise taxes or issue new debt. This means that your bonds stay secure no matter what.

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