The goal of most investors is to find stocks, bonds and funds that offer modest to high returns and won’t put capital at a significant risk—no one wants to lose their hard-earned money on investments.
Unfortunately, it can be difficult to find these types of investments. Most stocks require a fair amount of risk. High-performing investments tend to be riskiest. However, there are exceptions to this rule.
You won’t find an investment with zero risks, guaranteed principal and a return of 10 percent—unless you live in a fantasy world. However, some investments that are generally low risk generate relatively high returns. Here are six investments worth adding to your portfolio.
#1 Peer-to-Peer Lending
With peer-to-peer lending, or P2P, you invest your money in loans. So, instead of buying shares in a company, you would lend your money to individuals or businesses. Peer-to-peer investing is an entirely different type of investment. It has also become very popular due to its relative low risk and high yields.
Although the risk is generally low, it depends upon how you screen your loans. There is always the chance that a loan could go into default. Choosing highly-rated loans will help you secure a good return with little risk. P2P lending generally yields higher returns that what you will get from a money market or certificate of deposit.
#2 Money Market Fund
A money market fund is a type of mutual fund that consists of several types of low risk investments that are pooled together. The investments usually consist of short-term bonds, CDs and government securities. Although the returns aren’t phenomenal, a money market is a highly safe investment. Plus, a money market fund is liquid, which means that you can access your cash anytime without a penalty.
This is a good place to put your emergency savings. Get look for one that is FDIC insured. That way, you will face little risk and earn a higher interest rate on your investment than you would typically make from a regular savings account.
#3 Municipal Bonds
When a city or state government needs to borrow money for schools, roads, hospitals, sewer systems or other projects, they borrow through a municipal bond. These bonds are a smart choice for investors that want a decent yield at a low risk. They are exempt from federal income tax, which makes them ideal for people are trying to limit tax penalties. They are also relatively safe as governments do not typically default on loans, instead they usually raise taxes to pay off debt. This fact makes holding a municipal bond safe.
#4 Dividend Paying Stocks
Dividend paying stocks are one of the best low risk, high yield investments out there. Most dividend paying stocks are from companies that are mature and financially stable. The share prices of these businesses tend to increase steadily over the years.
Meanwhile, investors receive periodic dividend payments. Additionally, the dividends often grow over time as to not disappoint investors. A financially healthy firm will generate decent dividend payouts for years to come.
#5 Real Estate Investment Trusts
Real estate investment trusts, also known as REITs, are similar to mutual funds—but for mutual funds. These are excellent low risk, high return investments. REITs are funds that are usually invested in commercial real estate, such as retail stores, shopping centers, large apartment complexes and office buildings.
A REIT can be invested in various types of real estate developments located in different areas of the world. This helps reduce risk as the housing market often varies from one geographic location to the next. REIT’s provide liquidity as they trade on the main exchanges. So, you can buy and sell as you please.
REITs also receive special tax treatment and pay dividends, which makes them even more attractive. They can yield dividends more than ten percent. This makes them a great source of income.
#6 Preferred Stocks
Preferred stocks have some risk, but they have many advantages and a lower risk than other investments. Preferred stocks have preference over common shares. So, they have a higher claim on the company’s assets and earnings than common stockholders.
When it comes to paying dividends, preferred shareholders are paid ahead of common stockholders. When a corporation has fallen on hard times and must liquidate its assets, preferred shareholders are paid first. This makes them an excellent investment.
Regards,
Ethan Warrick
Editor
Wealth Authority
