With the rising cost of living, it’s imperative that we invest. And, obviously, when we invest our hard-earned dollars, we want to generate high returns while enduring little risk.
Possible?
Well, to a point. In terms of returns, there are better low-risk investments than others, but it is definitely still true that the higher return you want, the more risk you’ll have to accept.
But as you near retirement, or if you’re saving for your high school senior’s college fund, your appetite for risk drops precipitously. You simply cannot afford to see a huge drop in the market right before you need to begin withdrawals.
The Top 16 Best Low Risk Investments With The Highest Returns:
Our List of Low-Risk Investments
Here are a few of the best low risk investment options, some that even let you earn a respectable return with almost no risk at all, whether you’re investing $10,000 or $100,000.
1. High Interest Savings Accounts
If you’re looking for a risk-free way to earn some interest on your money, a high yield savings account might be your answer. With these accounts, you’ll earn a nominal amount of interest just for keeping your money on deposit.
Other than opening your account and depositing your money, this strategy requires almost no effort on your part, either. The best high yield savings accounts offer competitive interest rates without charging any fees.
We recommend these savings accounts:
| Bank | APY | Min. Deposit | |
|---|---|---|---|
| CIT Bank | 2.1% | $0 | Open Account |
| Betterment | 2.16% | $0 | Open Account |
| Discover | 1.85% | $0 | Open Account |
| HSBC | 2.05% | $1 | Open Account |
| BBVA | 1.90% | $10k | Open Account |
2. Microinvesting Apps
Microinvesting is a term used to describe saving, depositing, and investing small sums of money into an investment account that is primarily accessed through a mobile app.
I include this idea as a low risk investment because most microinvesting apps allow the user to select conservative ETFs or portfolios, which mean the underlying stocks purchased aren’t volatile.
Additionally, microinvesting is low risk because they don’t require you to invest more than a couple of dollars or even pennies at a time!
For example, with Acorns, you can set up your account to invest only spare change. The app connects to your bank account and each time you buy a coffee for $2.75, for example, it will round up to $3 and invest the remaining 25 cents on your behalf!
| Brand | Fee | Promo | |
|---|---|---|---|
| Acorns | $1/mo | $5 Bonus | Open Account |
| Stash Invest | $1/mo | $5 Bonus | Open Account |
| Qapital | $3/mo | 30 Days Free | Open Account |
3. Real Estate Crowdfunding
If you like the idea of investing in real estate but shudder at the thought of being a landlord or home prices where you live are too expensive, real estate crowdfunding could be the solution!
Real estate crowdfunding got popular after Congress passed the 2012 Jobs Act, which essentially allowed real estate investors and developers to raise money from the public to fund their projects.
For example, let’s say a developer has plans to build a 200 unit condominium in Las Vegas. In the past, he could only raise funds for this project from private investors in his network.
These days, however, he can list his project on a real estate crowdfunding platform and anyone in the public can invest!
There are loads of crowdfunding platforms and they each vary slightly. Some sell equity, others debt, some specialize in residential real estate, while others focus on commercial. It runs the gamut.
I recommend checking out the following:
| Platform | Min. Inv. | Term | |
|---|---|---|---|
| Fundrise | $500 | n/a | Open Account |
| CrowdStreet | $10k | 36 – 360 mos | Open Account |
| PeerStreet | $1k | 6 – 24 mos | Open Account |
| Roofstock | $0 | n/a | Open Account |
| RealtyMogul | $5k | 6 – 120 mos | Open Account |
4. Dividend Paying Stocks and ETFs
One of the easiest ways to squeeze a bit more return out of your stock investments is simply to target stocks or mutual funds that have nice dividend payouts.
If two stocks perform exactly the same over a given period of time, but one has no dividend and the other one pays out 3% per year in dividends, then the latter stock would be a better choice.
Picking individual stocks isn’t easy, so one option is to invest money into a dividend stock mutual fund. With this type of mutual fund, the fund managers target stocks that pay dividends and do all the work for you.
Below are brokerages that sell individual stocks and mutual funds we recommend:
| Brokerage | Promo | |
|---|---|---|
| Ally Invest | $0 stock and ETF trades | Open Account |
| TD Ameritrade | 60-day commission-free + up to $600 bonus | Open Account |
| E*TRADE | No trade fees | Open Account |
| M1 Finance | No trade fees | Open Account |
| Zacks | trades staring at $1/share for 12 months | Open Account |
5. Alternative Investments
There’s a myth that investing in assets beyond stocks and bonds is risky. This is 100% a myth.
Stocks and bonds carry a very real risk, and for that reason alone, it is wise to have a portion of your portfolio invested in alternative assets.
Alternative assets could include real estate, precious metals, agriculture, art, hedge funds, commodities, antiques, etc. (the list is long).
In the past, alternatives would be part of a mutual fund, where the fund manager decides which alternatives to buy and how much. These days, however, as the internet has decentralized investing — we have many options right at our fingertips!
Some companies to consider:
| Brand | Asset Class | |
|---|---|---|
| Masterworks | Art | Learn More |
| BluePrint Income | Annuities | Learn More |
| Rocket Dollar | Misc. | Learn More |
6. Peer-to-Peer Lending
Peer-to-peer lending, or P2P Lending, is one of our highly recommended short term investments. Instead of buying shares in a company, you are lending your money to individuals or businesses, with the idea being they will pay you back with interest.
The way it works is this: Let’s say someone needs to borrow $10k to consolidate their debt. They create an account with Lending Club (for example) and depending on their credit history, income, etc. are given an interest rate on the loan. I as an investor also creates an account with Lending Club and buys this debt. That way, when the borrower makes monthly payments, the principal and interest are paid to me in my Lending Club investment account.
There are several companies that underwrite P2P lending, some like Lending Club facilitates personal loans, while others, like Worthy, facilitate business loans (the process is the exact same).
Check these guys out to learn more:
| Brand | Min. Deposit | Return | |
|---|---|---|---|
| Lending Club | $25 | 4 – 7% avg | Open Account |
| Prosper | $25 | 5.20% avg | Open Account |
| Worthy | $10 | 5% fixed | Open Account |
| StreetShares | $25 | 5% fixed | Open Account |
7. Money Market Funds
A money market fund is a mutual fund created for people who don’t want to lose any of the principal of their investment. The fund also tries to pay out a little bit of interest as well to make parking your cash with the fund worthwhile. The fund’s goal is to maintain a Net Asset Value (NAV) of $1 per share.
These funds aren’t foolproof, but they do come with a strong pedigree in protecting the underlying value of your cash.
It is possible for the NAV to drop below $1, but it is rare. There are dozens of banks and financial institutions where you can open a money market account, but we recommend one of the following since they tend to offer the best rates:
| Bank | APY | Minimum | |
|---|---|---|---|
| BBVA | 1.90% | $10,000 | Open Account |
| CIT Bank | 1.85% | $100 | Open Account |
| Betterment | 2.11% | $0 | Open Account |
8. Social Investing
Eager to start investing but don’t know what to buy? Robo-advisors and microinvesting apps are great for folks that want to reap the rewards of investing, but don’t necessarily have dreams of analyzing and investing in individual stocks themselves.
So where can a new investor go to learn the ropes of choosing individual stocks and selecting investment strategies?
The answer lies in Social Investing, a term that describes a movement in which traders and investors share their strategies and stock analysis with the public.
There are a number of platforms that facilitate this, and once you sign up to one, you can browse through investor profiles and follow them as they make trades and investments over time.
In other words, social investing is a way to learn how to invest by watching others do it! We recommend looking into Titan Investing.
Learn More about Titan Investing>>
9. Municipal Bonds
When a government at the state or local level needs to borrow money, they don’t use a credit card. Instead, the government entity issues a municipal bond. These bonds, also known as munis, are exempt from Federal income tax, making them a smart investment for people who are trying to minimize their exposure to taxes.
Most states and local municipalities also exempt income tax on these bonds but talk to your accountant to make sure they are exempt in your specific state.
What makes municipal bonds so safe? Not only do you avoid income tax (which means a higher return compared to an equally risky investment that is taxed), but the likelihood of the borrower defaulting is very low. There have been some enormous municipality bankruptcies in recent years, but this is very rare. Governments can always raise taxes or issue new debt to pay off old debt, which makes holding a municipal bond a pretty safe bet.
You can buy individual bonds or, better yet, invest in a municipal bond mutual fund at brokers like:
| Brand | |
|---|---|
| E*TRADE | Open Account |
| TD Ameritrade | Open Account |
| Ally | Open Account |
10. Annuities
Annuities are a point of contention for some investors because shady financial advisors have over-promoted them to individuals where the annuity was not the right investment based on the investor’s goals. But in reality, annuities are a great fixed-rate investment, not that different in structure than a CD.
So what is an annuity?
An annuity is a contract between you and an insurance company. You as the investor make a lump sum payment to the insurance company, and in return will receive regular disbursements beginning at some point in the future. The product is great for retirees, or anyone who wants steady, predictable returns on their cash.
You can buy annuities through traditional investment platforms like Vanguard and Fidelity, or you can speak to your financial advisor who may recommend a local alternative.
I personally have discovered Blueprint Income and love how these guys are using technology to make investing in annuities more accessible and transparent than ever before.
Learn More about BluePrint Income>>
11. No-Penalty CDs (Certificate of Deposits)
No matter how hard you look, you won’t find an investment more boring than a Certificate of Deposit.
With a Certificate of Deposit (CD), you deposit your money for a specific length of time in exchange for a guaranteed return no matter what happens to the interest rates during that time period.
Be sure and buy your CD with an FDIC insured financial institution (up to $250k is insured). The longer the duration of the CD, the more interest the financial institution will pay.
I recommend the following places to open and invest in a CD:
| Brand | APY | Term Min | Deposit | |
|---|---|---|---|---|
| CIT | 2.05% | 11 mo | $1,000 | Open Account |
| BBVA | 2.00% | 12 mo | $500 | Open Account |
| Nationwide | 2.20% | 12 mo | $500 | Open Account |
12. Credit Card Rewards
The idea that credit card rewards could provide a low-risk return on your money might sound preposterous, but it’s not that off the wall when you really think about it. By picking up a cash back credit card, you earn “points” that translate into real free money.
And in reality, the “rewards” you earn with some of the top cards are far more lucrative than anything you might earn with a Certificate of Deposit or online savings account.
Here’s how these offers work:
| Card | Bonus | Reqs | Fee | |
|---|---|---|---|---|
| Capital One Quicksilver | $150 | Spend $500 in first 3 mos | $0 | Learn More |
| Wells Fargo Cash Wise | $150 | Spend $500 in first 3 mos | $0 | |
| Chase Freedom | $150 | Spend $500 in first 3 mos | $0 | |
| Bank of America Cash Rewards | $200 | Spend $1,000 in first 3 mos | $0 |
13. Online Checking Account
Just like high yield savings accounts, online checking accounts let you earn small amounts of interest on the money you deposit. If you’re going to park your money in the bank anyway, you could surely appreciate earning some interest along the way. Best of all, many online checking accounts charge zero or minimal fees to get started.
When looking for an online checking account that actually lets you earn interest, look for a bank with excellent customer service, a user-friendly online interface, and competitive interest rates.
In fact, I would recommend any one of the banks below:
| Bank | APY | Fees | |
|---|---|---|---|
| Capital One | 1.0% | $0 | Open Account |
| Ally | 0.6% | $0 | Open Account |
| Discover | n/a | $0 | Open Account |
| HSBC | .01% | $0 | Open Account |
14. Bank Bonuses
This isn’t exactly an investment idea, but it is a way to earn risk-free cash.
If you have money set aside that you won’t need for a while, it may be worth it to take advantage of banks’ sign-up bonuses.
Just for creating an account and keeping it open for a certain amount of time, banks offer new customers upwards of $200, $300, sometimes even $500 or more!
Below is a list of banks offering cash sign up bonuses.
Remember to read all the fine print and understand the requirements before signing up.
| Bank | Bonus | |
|---|---|---|
| Discover | $150 if you deposit $15,000, $200 if you deposit $20,000 | Learn More |
| Citibank | $400 if you deposit $5,000 | Learn More |
| Bank of America | $100 if you set up direct deposit | Learn More |
| Chase | $100 for all new customers | Learn More |
15. Preferred Stock
Adding on to the dividend stock theme is preferred stock. Preferred stock is a type of stock that companies issue that has both an equity (stock) portion and a debt portion (bond). In the hierarchy of payouts to forms of investments, preferred stock sits between bond payments (which come first) and common stock dividends (which come last).
Preferred stock are not traded nearly as heavily as common stock, but do have less risk than the common stock. It is just another way to own shares in a company while getting dividend payments.
You can track down preferred stock investments at:
| Brokerage | Promo | |
|---|---|---|
| Ally Invest | 90-day commission-free + up to $3.5k bonus | Open Account |
| TD Ameritrade | 60-day commission-free + up to $600 bonus | Open Account |
| E*TRADE | No trade fees | Open Account |
| M1 Finance | No trade fees | Open Account |
| Zacks | trades staring at $1/share for first 12 mos | Open Account |
16. Cash Value Life Insurance
Another controversial investment is cash value life insurance. This insurance not only pays out a death benefit to your beneficiaries when you die (like a term life insurance policy) but also allows you to accrue value with an investment portion in your payments.
Whole life insurance and universal life insurance are both types of cash value life insurance. While term life insurance is by far a cheaper option, it only covers your death.
One of the best perks of using cash value life insurance is the accrued value can not only be borrowed against throughout your life but isn’t hit with income tax.
While cash value life insurance isn’t for everyone, it is a clever way to pass some value onto your heirs without either side being hit with income tax.
The Bottom Line
As you get closer to retirement, it’s important to reduce your risk as much as possible. You don’t want to start losing capital this late in the game; since you have many years of retirement ahead of you, you want to preserve your cash.
The best low risk investments can help you do just that. By letting you earn nominal amounts of interest on your money with little risk, you can help your nest egg keep up with inflation without losing your shirt. Just remember to read the fine print and educate yourself along the way. And if you’re ever in doubt over an investment product or service, speak with a qualified financial advisor and ask as many questions as you can.
Check out some of our great reviews to help you get a better grasp on what will meet your investment needs:
Poed says
So basically nothing pays much, but if you want to play around with money try one of these. You bet!
Michelle Catapang says
Hi! Excellent content! Looking forward to other tips you can give us regarding investments. Thank you!
joe says
very well written and informative…most articles advised retirees or close to retirement to take on more risk..i like the idea to be conservative while in or near retirement..
Sebastian says
“In my experience, CIT Bank has a great reputation for offering some of the most competitive CD rates.”
You’re kidding, right?
Cit Bank, for a jumbo account, is sitting around 1.75% for a 5 year CD. Compared to over 3% for USAA, Capital One, etc….Even Wells Fargo, for a non-jumbo account is 2.47-2.50%
1.75% is not even remotely competitive, and their other rates aren’t even worth mentioning.
You should cast your gaze further than Cit Bank.
Akintunde, SOLA Olayiwola says
Kindly elucidate on franchise investment and its rate of return. I mean franchising investment where an investor invests his money to earn profit. Thanks
khayalethu mbengo says
i would like to start investing my money on a number of things incl JSE, unit trusts, index tracker funds, stock markets tax free benefits for long term and possible forex trading. Please advise asap before i commit my money without any prior knowledge
Ramesh Patel says
I am interested to invest 1.0 lack dollars
John Canu says
Excellent information. Thank you.
Austin says
The top item on your list of “best low risk investments with the highest returns” is PEER TO PEER LENDING? Are you completely INSANE? I tried it on Prosper a few years ago and ONLY went with B+ rated or better. Half the people took the money and ran and there was NOTHING we could do about it. Stupidest thing you can do with your money, hands down.
Kevin Tyson says
I was searching for a way to invest money but I lost my investment in the stock market so I was constantly looking for something more stable and I am very skeptical about being scammed long story short I found a Team and platform that allows me to make 1% per weekday on my investments best part is it works just like a saving account and is fully licensed. Now I want to introduce other people to it because it is not fair for our hard earned money to be scammed using shady investment tricks.
Jeff Rose says
Not to burst your bubble Kevin, but 1% per day sounds a lot like a scam – or day trading. Think about it, if you could make 1% per weekday, and there are 260 weekdays per year, that’s a 260% return based on simple interest alone. I’ve not heard of a return even close to that that wasn’t a scam. Please be very careful.
Rosa Gonzalez says
I want to invest $1700.00. I’m not certain which route to take if an annuity or a savings account? I hope you can help me.
Jeff Rose says
Hi Rosa – With that amount of money I’d emphasize keeping it safe and avoiding fees (that come with annuities). A good high yield savings account or CD with an online bank would be your best bet.
Jon Giezentanner says
I have a 457 plan with ICMA. I have invested $92,578 of my own money in it over a period of 23 years. The account now has $138,000 in it. Is that normal for a 457 plan? I only found out about year 20 that we were supposed to manage the accounts ourselves. I know absolutely nothing about managing an investment account and many of the funds my money was in were making 0% per quarter but I was still being charged extravagant fees by ICMA.
Jeff Rose says
Hi Jon – After 23 years that sounds ridiculously low, especially after how the financial markets have performed for the past 9 years. I’d discuss it with your employer, the plan administrator or the investment manager who charged all the fees.
Jane Doe says
A Nigerian prince sent me an email and is sending me 50 million dollars. He just needs my banking info so he knows where to send the money. I can’t wait…
keith says
Im thinking of investing 275K in a moderate risk Merril Lynch plan. It is not insured and I’m 2 years from retirement. What would you put it in? any insured options?
Jeff Rose says
Hi Keith – Since I don’t know you personally, I won’t/can’t make specific investment recommendations. You might want to discuss this with an advisor at Merrill Lynch.
Mahtab Naqvi says
Forget Merrill Lynch, dare to invest in downtown Gulberg (Lahore, Pakistan) in a mixed use apartments building and you end up earning more than 30% per annum do a little research to brighten your after retirement life a cozy one.
Jim says
The best LOW RISK investments for HIGH RETURN??? I’m shocked at this article. The financial institutions would love to paint a beautiful picture of how cash value life insurance and annuities and 1% savings accounts etc (everything you see in the article above) can give you everything you could possibly get as far as safe returns. Check out Fisher investments before you invest in one of these and ruin your savings.
Folks, do your research and due diligence. You will in almost every case listed above loose money to inflation and/or fees. I would never do business with any major financial institution, especially Merrill Lynch. They (MERRILL LYNCH) solicited me through a phone call back in the 2000’s and I listened to their pitch and invested my 401k in their fund picks. Every one failed miserably and years later I saw they got in trouble for this very thing by the SEC because they were in it for the fees and expenses and not for my success. Important lesson learned for me and since, I have found numerous places to get investment info. There is a saying no risk, no reward. That is very true. If you want any decent return (10-20%+), you must be able to stomach some risk. You just have to get used to some losses. Nobody is 100%. There are many groups out there who have some great ideas that would support higher returns for some risk, and not everything I have found with any one org is 100% for me. I have to pick and choose the pieces which I feel benefit me. The Motley Fool, Stansbury Reasearch, Oxford Club, Formula Stocks Pro, Zacks, Fisher investments all have pieces which, if you spread the risk, will produce returns beyond anything this article even hints at. Don’t line the pockets of your investment manager, PAY YOURSELF and manage your own money. Reasearch some of these and you will see for yourself. Don’t let someone talk you into believing a lie. There are returns out there. Those wall street guys aren’t super human. You are just as smart as them and you don’t need a degree in finance or economics to know where to invest your money. There are so many baby boomers out there that they see opportunity to cash in on their (OUR) financial ignorance. Take control of your finances and you will be a success. Didn’t mean to write all this but it’s true. America, we need to teach our children financial success at a young age. Just saying.
Jeff Rose says
Hi Jim – I’m sympathetic with your thoughts, but there’s no perfect investment out there. We tried to address the portion of a portfolio that will be held in relatively safe investments, which every portfolio should have. We never said that any of these investment options are a cure-all. As to Fisher Investments, I’ve done some research on them and they aren’t a perfect solution either. You have to achieve balance, and invest where your comfortable.
Jason says
Jim’s reply is an exact illustration on how everyone’s investment process and choices are unique to them. I think this article offers some great insights, especially for anyone curious to refresh their knowledge on the options, etc.
Oskar says
Hi Jeff, do you only advice investments in banks? can you guide me in how to invest in any business, like a small restaurant in a food court or something else in order to the a safe and fast return? I have around 80k to make and investment, thank you so much Jeff, regards from Cancun Mexico
Jeff Rose says
Hi Oskar – I can’t give advice on investing in specific business ventures. Each has to stand on its own merits, and work in a particular location. I’m not in a position to give advice for anything that specific. Sorry!
Precious says
Hi, I live in Nigeria but I would like to invest in lending club,did open the site and I wanted to register but there was some constraints like having to chose my state which i didn’t fall into an option there how would I go abt it thank you…your doing a great job here
Jeff Rose says
Hi Precious – To my knowledge, Lending Club is only available to US residents. That’s why I believe you were having a problem.
wale Adeniji says
hi jeff.
i actually fall to this category too. i watch your video on youtube on “11 Passive Income Ideas” and i think the p2p is better for me… is PROSPER too limited to USA or worldwide.
i just need something i can invest into. if there are other P2P investment sites you can recommend that is legit… please share with us.
thank you
Jeff Rose says
Hi Wale – Most P2P investments are country specific. That’s due to national laws in each country. Try googling “peer-to-peer investing” in your own country, and see what comes up.
Sharon says
Is p2p lending only for US, Canada or Australia residents?
Jeff Rose says
Hi Sharon – It seems to be mostly in the English speaking countries, yes. But mainly the US and UK. Not all P2P lenders are in all countries, and some are in one country only. You really have to do your research.
Godwin says
I’m a part time student. I work and save in bank without interest. Please can someone tell me where to invest around the world without risk or low risk. ( the website of the investment).
Jeff Rose says
Hi Godwin – You might seriously look into high yield accounts with online banks, like Ally Bank. You can get 1% with no risk whatsoever.
Clay says
Jeff,
Your website is excellent for those who has no much idea like me in investing money. Thank you very much. Clay
Jeff Rose says
You’re welcome, Clay!
Sen Darbi says
Jeff,
looked into P2P a while back. I think it was Lending Club. Seemed to me that you could not invest more that $25,000, or some limit like that. Or did it mean you could not invest more than $25,000 in a single loan, but that you could invest more through more loans. Can you help with this? What if I wanted to invest 50k, 100k? Is that possible with P2P? And I think some states were excluded, but not mine.
Jeff Rose says
Hi Sen – That limit is a state law limit, not a Lending Club limit. This page from Lending Club says the following:
“Certain states have particular limitations on the amount that you may invest, but under no circumstances are you permitted to purchase Notes in excess of 10% of your net worth (exclusive of the value of your home, home furnishings, and automobile). Please see our State and Financial Suitability Policy for more details.”
So if you disclosed $250,000 in net worth, you’d be limited to $25,000 on Lending Club, or any other P2P platform in your state.
James says
I am truly astounded to see cash value insurance on here. There couldn’t be a bigger rip-off. You fail to mention that you’ll pay a hefty interest rate on anything you borrow. You also fail to mention that cash value is lost upon payment of death benefit or visa versa. If life insurance is needed it’s ALWAYS better to pay the lower premiums of term and chose almost any of these other options.
Jeff Rose says
Hi James – I said it’s controversial, and it’s not for everyone, but it does have a purpose. For people who need life insurance, but aren’t good at saving money (which describes millions of people!), cash value life insurance functions as a forced savings plan. Not the best vehicle, for all the reasons you’ve pointed out, but not entirely without use either.
Monica says
I am so confused! I am a doctor who cannot get ahead of the interest on my education loans. The amount I owe is snowballing and it wakes me up at night in a cold sweat. I have very little money to invest at the end of the month but would like to do so with the goal of paying down/off my loans in large lump sum(s).
Where do I begin?
Jeff Rose says
Hi Monica – Since you are earmarking savings to payoff debt, you should be as conservative as possible with your investments. CDs would probably be the best choice. You don’t want to have any risk of loss, since that would hurt your ability to use the money to payoff debt.
Brent Hayes Prenton says
Jeff,
What’s the most i should be paying for a fee based account for asset management. I’m seeing all of these online options and a local person was telling me i would pay 1.75% to get my money managed-is that too high?
Hayes
Jeff Rose says
@Brent I think it really depends if that is the “all in” cost. What I mean that is the advisor could be quoting you 1.75% as their advisory fee but that doesn’t include the cost of the actual investment holdings like as mutual funds or ETF’s which can drive up the cost even more.
Tim says
Jeff,
Are you a broker yourself? None of my business but I am curious to ask this question. I am looking to invest with a handful maybe less of trusted individuals so that we could all capitalize equally and distribute the take when reached at a certain amount goal. What would be the best option to take here? I am looking to invest and have a generous return from the market in which I invest. The point of this is however, who or what or where do I (we) invest the funds in to seek back a return? For me personally I am looking to pay off some debt I have and invest in buying a home in the next 5 years.
I am currently 31 years of age and wished that I have done this years ago.
Jeff Rose says
Hi Tim – You really need to sit down with that group of individuals and have a consensus as to where you want to invest. On in individual level with a five year time horizon, I’d probably go with an equal mix of peer-to-peer lending for higher return, and CDs for safety. But that’s just an opinion. I don’t know what your personal situation and risk tolerance are.
Jeff Rose says
Hi Hayes – I’d say not more than 1% for a personal investment manager. But you can do a lot better than that. For example, Betterment will manage your account for as little as 0.15%.
Neha says
Peer to Peer lending is the best utilization for your money if you are investor and best source of funding if you are Borrowers. It provides a platform where an investor can fund the borrowers without going through the traditional banking system.
Frank says
Hey Jeff,
Thanks for sharing
I’m not sure if it was this episode or not but I have the same issue with wanting to jump head first into things. I need to do a better job with due diligence some times.
Frank
Kyith says
i think your main problem is that you are treating less than 5 years of good performance as your ‘EDGE’ while people can be lucky 5 years in a row.
Sometimes we have to concede that we are just not good enough active managers around.
Jeff Rose says
@ Kyith I guess I’m not following you. Did I mention something about this in the podcast? I was sharing some of my bad investments not anything I made money on in the past 5 years.
kyith says
Hi Jeff, there is a relation to why i reference 5 years. I listen to all your podcast not just here but at Todd Treissder and Entrepreneur on Fire and that i know you are pretty big on active management and peer to peer lending.
while highlighting caveats like this is extremely good, there is a concern that even for those more successful deals can originate because more of a luck factor (due to a rising tide) rather than the “EDGE”
by only doing it more than 5 years consistently gaining good result perhaps we can lay it down to competence.
the same for peer to peer as the better default result can be a manifestation of folks facing less problems. that could be rather different when another receission comes.
it will be good also to cover the different time cost required to gain a certain level of competency to consistently not make such problems.
Roger @ The Chicago Financial Planner says
Nice post and a helpful list. As I’m guessing that you might concur the message I convey to folks in or near retirement is that the biggest risk they face is not a loss from their investments its being too risk averse and running the risk of outliving their assets. I sure you noticed but TIPs funds really got slammed in Q2, a bit of an over reaction to the Fed, but none the less TIPs have done better over the past several years than the underlying economics of the instruments might suggest.
Derek @ MoneyAhoy.com says
I too am interested in P2P lending. I guess I will have to get up off my butt and give it a chance vs. dragging my feet.
Mark Ross says
I didn’t know that there are as many low risk investments that can give high returns available before, I only knew mutual funds and money market funds and I don’t have any idea about the rest. Really helpful post, thanks Jeff!
Sean @ One Smart Dollar says
I really need to start with P2P lending. It has just been tough for me to stop putting money into the stock market the last couple of years.
stanley obieze says
Good day sir,
I have been following your post for quite some time now and honestly speaking,am beginning to have a better understanding about the world of investment.
Sincerly speaking,am a newbie to the world of investment and I think that’s the reason I have made so many financial looses online.I realy want to ask “which Low risk investment would you recommend for some one like me with little capital” that grows steadily within a year or less?please do reply because I realy want to get out of the “rat race circle” Thanks alot
Eric Parker says
You mentioned steady growth within a year or less. The reality is that’s not how investing works. You can try to pick individual, undervalued stocks and sale when the price goes up, just beware of the risk involved and manage your account with any one of the many online broker site that were designed for such things. Aside from that, you should get in the habit of saving and not living beyond your means. If you’re not really saving now, start with what you can. $5 then turn it into $20 etc. Long term goals and then working backwards to put a plan in place to achieve those goals is the name of the game. It doesn’t happen in a year, it’s discipline and sound principles that stretch over the course of twenty, thirty years plus. Diversify and protect yourself along the way. Hope this helps.
Sadie says
US SAVINGS BONDS via http://www.TreasuryDirect.com
Sad to see the ease in purchasing a paper bond at local bank has been discontinued.
With the “intricacies” of having to purchase online via TreasuryDirect, move paper bonds to on-line account, I fear far too many grandparents gifting will eventually cease. Even the parents tend to shy away from using as is so complicated.
Should you pursue, ensure you read & I recommend print a copy of the 13 page instructions; even then all is not clear when multiple changes are being made. I must adminth The Wizard was of benefit in capturing the data.
However, if a wrong date of purchase is entered, Treasury Direct is not set up to detect this. Though it will detect if Bond # does not match the Type or Denomination. Interesting! If not identified at entry point, then might it be overlooked at time of “cashing in”? USE CAUTION WHEN ENTERING YOUR DATA.
JW @ AllThingsFinance says
I’m a big fan of P2P lending. So far this year, my net annualized return is over 15%. I’m really hoping I can maintain those numbers over the long term.
Brett Quayle says
I have been looking at this as well, however, since I’m in Michigan, I can’t do it!
Peter Renton says
Jeff, I am glad you included p2p lending on this list as a middle risk investment (and thanks for linking to my article by the way). With Lending Club hitting $1 billion and becoming cash flow positive I don’t think it should be considered a high risk investment. I think it is the best risk/reward investment available today – one where double digit returns are quite possible.
Jeff Rose says
@ Peter The more I dig into p2p lending the more I get excited about it. Especially considering the recent pull-back in the market. My Lending Club account has returned a consistent > 9% return since 2008. I’m also going to open an account with Prosper, too; just haven’t had the time.
For my clients that are more online savvy, I encourage them to at least look at and consider p2p lending as a part of their portfolio.
Cameron says
Just how volatile have the markets been the last two months? Would you be surprised to know that August and September 2011 rank amongst the top 5 most volatile periods in the last 50 years? I was. I knew things were bumpy but I didn’t realize they were Top 5 bumpy.
John @ Van Winkle Insurance Group says
Great article! just wanted to comment that its also a great idea to reallocate your investment portfolio during volatile times. Keep up the goof fight Jeff and Miranda!
Evan says
Great post. Thinking long term is important, especially if you are dealing with a retirement account. Creating a long term plan that fits your risk is key.
Smith Lottery says
Recent international political instability, it is very risky.
Vince Thorne says
Its OK if you buy high but never sell low.
Benjamin says
As always, good advice Miranda! I was hoping that I wouldn’t read anything in the article about trying to “time” the market, and I’m happy to see you’re one of the few that doesn’t try to go down that road.
I’m a strong believer in “market efficiency” a accept that virtually all bad news and good news available (either through research or statistical analysis) is already reflected in the current financial market.
Investing in healthy growth and value companies over the long haul along with the other suggestions you’ve offered, is the only realy “sure fire” way of getting through this volatile period.