Investing
Which investment type typically carries the least risk?
Want to try out a new investment type that has a lower risk? Don’t worry there are several such investments that are classified as low risk and provide quite good interest rates. In addition many of these investments can be closed easily and you can access your money without hassle. Below we look at how these low risk investments, stack up against each other. Also we consider how low risk investments are the best option when the economy is not performing well.
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The good old savings account
For many the best low risk investment type which allows for ready access to funds is the savings account. Even though a savings account provides much lower interest rates than a certificate of deposit. Among the benefits of a savings account is that your money remains safe in the bank. Also money can be withdrawn via an ATM with a linked debit card, or it can be transferred to another account using EFT or a check.
A money market account
Also on offer by banks is a Money Market Account and it provides a higher interest rate than a savings account. However, one of its disadvantages is that customers have to maintain a higher minimum balance. Additionally the amount of transactions that can be done via check and debit card are also sometimes restricted. Much like a savings account, the amount in a money market account is insured and this makes it very safe.
The certificate of deposit
With a certificate of deposit your money is locked in for a period which can range from six months up to five years. This investment type importantly does not expose the depositor to high risks,but interest rates are higher as funds cannot be withdrawn readily. Additionally if you park your money in a certificate of deposit for a longer period you will get a higher interest rate. With your money becoming available after a fixed period, a CD is a good choice if you plan to purchase a car or a house after six or more months.
Treasury securities
In the case of Treasury Securities a depositor, actually loans a sum of money to the government. A Treasury Security importantly is offered in an auction, and an individual can act like an investor and buy it like stock in a company. The value at which a Treasury Security can be bought varies and once it matures you can often sell it at a higher price and therefore earn a profit. Treasury Bills, Bonds and Notes are included in Treasury Securities, and come with different maturity periods which can range from months to several decades so take this into consideration.
Money market mutual funds
Considered to have a higher risk than savings accounts for example, money market mutual funds often are not insured and are offered by brokerage firms and companies that deal with mutualfunds. Once money is put into these funds it is invested in T-bills and municipal bonds. Importantly money market mutual funds provide investors, with quick and easy access to cash, as settlements are made on the same day on which a sale is made.
Choosing a low risk investment type is what many people do when the economy is sliding into recession or in the midst of one. Such investments often have low interest rates but are unbeatable when it comes to security features and provide easy access to funds.
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