Tips for Making Safe Investments

[Lisashoreland]

Tips for Making Safe Investments

Although all investments carry some amount of risk, this list represents the lowest risk investments available. While they may not yield the highest returns, they are good for people who have lost confidence in the financial markets, or are interested in investing conservatively. As with all investing, it is best to diversify a bit, maintaining several short term investments that have a higher degree of liquidity with some long term non-liquid investments.

Savings Accounts

Each savings account is insured by the FDIC for up to $100,000, making this one of the safest investments. If you are planning to invest more than $100k into savings accounts, you will have to open accounts with multiple banks, opening multiple accounts with the same bank or with different branches of the same bank will not insure the additional money. Massachusetts offers additional insurance on top of the FDIC, making opening an account with a bank located there another option for people that fall into this category. The biggest detraction to savings accounts is the low interest rates, which may not be high enough to cover inflation.

Certificates of Deposit

CD’s yield higher returns than savings accounts, but you won’t have access to your money for the duration of the CD. Typically, the longer the duration the CD is the higher the returns. These non-liquid investments are generally considered to be very safe.

Government Issued Securities

Although government bonds are not considered as secure as they once were, they are still considered a conservative investment.

• Treasury Bills – Considered by many to be the safest type of security, treasury bills are sold at weekly auctions and like CD’s have a time period in which they mature. Unlike CD’s the time to maturity is one year or less. No interest is made on the security until it has matured, a system called zero-coupon. These types of bonds are actually sold at less than their face value, reaching this value once they’ve matured.
  
• Treasury Notes – These typically have a maturity period of 1 to 10 years. Unlike Treasury Bills, Treasury Notes have a coupon, a periodic payout of the interest.
  
• Treasury Bonds – These have a longer maturity period, usually between 20 to 30 years. They have a coupon payment as well. Although once popular, they have fallen a bit by the wayside in recent years.
  
• Treasury Inflation Protected Securities (TIPS) – These are similar to treasury notes, but the coupon payment is pegged to the inflation rate. This type of security was invented with maintaining fixed returns regardless of changes to inflation.

Money Market Accounts

These are similar to traditional savings accounts but with some important differences. They have larger interest rates than savings accounts, but with more restrictions. Typically it is necessary to maintain a larger minimum balance and there may be monthly limits on the number of allowed transactions. Their overall liquidity lies somewhere between a savings account and CD’s.

Fixed Annuities

These are similar to CD’s but have features making them attractive as a retirement investment. They have more liquidity than CD’s, are tax deferred, with typically higher payouts. The defining feature of these types of investments is a fixed interest rate over a specified number of years. They have a lifetime paycheck option, which typically pays a principle out every 6 months.

Gold and other rare materials

Gold has been a typical investment strategy as a hedge against economic disasters for a long time. The biggest concern when investing in gold is the large number of gold-related scams that exist. Some gold selling organizations have even been linked to terrorist activities. Make sure to buy your gold from a reputable source, and avoid any deals that seem too good to be true.

Safe Stocks

Even during recessions there are a number of stocks which are considered safe. People still need to eat, groom, etc. So companies that cater to these basic needs tend to not get hit quite as hard. Here is a list of some companies who have continued to perform well despite the latest economic downturn.

• Proctor and Gamble
• Sysco
• PepsiCo
• Sarah Lee
• Colgate-Palmolive
• Johnson & Johnson

Invest in yourself

Taking college classes, obtaining professional certifications, opening a business, or starting a blog are all good ways to invest in yourself. Like with anything, always keep your personal strengths and weaknesses in mind, and avoid wishful thinking. Although self investment may not reap the same short-term financial rewards as some of these other investments, in the long run it will always be the best investment you can make.

Bio: Lisa Shoreland is currently a resident blogger at Go College, where recently she's been researching returning student grants as well as Latino college grants. In her spare time, she enjoys creative writing, practicing martial arts, and taking weekend trips.

[clydewolf]

Each savings account is insured by the FDIC for up to $100,000,

All non interest bearing transaction accounts are insured to full value.

On July 21 of 2010, the standard deposit insurance limit was increased to $250,000.
This limit is per depositor per depository institution for each account ownership category.

Here is a link that can help you estimate your FDIC coverage: https://www.fdic.gov/edie/index.html

[DerrikCFP]

I'm curious about your inclusion of Gold as a safe investment. Could you explain what you mean by that?

Derrik Hubbard, CFP
www.yourfinancialpurpose.com

[Channing]

Thanks for posting about all these precisely mentioned but full of information contained articles here on this forum about, tips for making the safe investment, saving accounts, certificates of deposit, issued securities, money market account and safe account. Thanks for all these.

[Seopia]

This was such an informative topic... I have got to know a lot about investment by going through this article.. Thank you so much for sharing such nice information with all of us.

[Jonathan K]

I agree CD's, Annuities, Government securities, and even a matching 401k are pretty safe investments.

Savings

Most savings accounts generate less than half a percent in interest. That doesn't even cover inflation. Your bank is just using your money you invested at say 1% and lending it to John Smith for 6-15%. It might be safe but it's not a good return on investment.

Gold

My Grandfather said investing in gold was not a good idea. In the 60's and 70's people would tell him, "Buy gold it is going to become the new standard again..." and yet the price of gold has been pretty stable. Gold is historically still not a good investment as far as return on investment. Your money invested in gold will depreciate since gold is stable.

Money Market Accounts

I would argue that the stock market may not be what it used to be. Returns of up to 12 or 13% have not been uncommon in the past 20 or 30 years. The stock market probably will end up yielding less than that. Probably 4-6% in the near future is what I predict.

[cynthiaH]

Thanks for the tips. Anyway, when you invest cash in company stock, commodities, futures and other venues, the expectation is that you will enjoy reasonable return on your money, maybe even high returns. However, investment charges can creep in and eat away at the gains. Pay attention, and also you can learn the way to save money on investing fees. Resource for this article: How to save money on investing fees.