3 Low-risk Ways to Invest today
While opening a savings account or investing in bonds are low-risk ways to invest money, they also come with low returns. Investors looking for greater returns should look into newer options like Peer to Peer lending as an alternative investment option.
Looking for ways to invest with low risk? That’s a good sign that you’re a smart investor.
It’s easy to have a ‘go big or go home’ mentality when it comes to investment. Unfortunately, this type of approach often fails when put into practice. Treating investment like gambling is one of the surest ways of losing your money.
That’s why knowing how much risk you can tolerate is just as important as finding something to invest in. When deciding where to invest large portions of your savings, you don’t want to roll the dice. You want something that gives you reliable growth.
There are many low risk ways to invest available to you today. Here’s our recommendations for some of the best places to invest money with low risk.
3 ways to invest with low risk
Bank savings accounts
Compared to other investment options, a savings account is one of the best ways to invest money with low risk.
A savings account gives your money protection and annual interest rates and you get convenient access to it.
Banks are backed by the Federal Reserve, so the only way you’ll lose your money is if the government goes bankrupt. Investing in a savings account comes with very little risk. However, the money you earn in return is comparatively low as well, with most banks throughout the US offering anywhere from 0.65 – 0.91% APY.
Bonds & Certificates of deposit
Bonds and certificates of deposit (CD) are fixed-income securities that are issued to raise money for the lender (usually a government). You can think of them as an I.O.U note.
An entity issues a bond or CD to an investor with terms like the date of interest payments, length of time until expiration, and when the full amount must be paid back to the investor.
By holding a bond or CD, the investor can collect interest payments from the lender. When the bond or CD matures, the company returns the principal amount owed to the investor. This terminates the I.O.U contract between them.
The biggest difference between these two investments is that CD’s are generally short-term (1-5 years) with average rates around .47%. Investments and bonds are long-term (10, 20, or even 50 years) with rates at 1.57% for 30 years.
Peer-to-peer (P2P) lending is a riskier, but higher-yield form of investing. Similar to borrowing from a bank, P2P lending is about borrowing money directly from other people through online platforms.
P2P lending is not strictly regulated by government institutions, meaning if someone defaults on the loan, you risk losing principal invested. However, greater risks often entail greater rewards.
To offset the risks associated with P2P lending, many lenders charge high-interest rates which can range from 4 – 20%. They also offset risk by assessing borrower credibility and offering collateralized loans. Due to its high returns and moderately-low risk, P2P lending is quickly becoming one of the best ways to invest money with low risk.
But investing with major P2P investment platforms like Prosper and Lending Club still sticks you some risk of losing your investment if the borrower cannot pay. If you really want good rates with low risk, you may want to try a more advanced platform.
Invest P2P with MyConstant for up to 7% APR on fully-collateralized loans
On MyConstant, we’re quickly setting a new standard for safe lending using cryptocurrency as collateral. You can invest with low risk knowing your investments are covered if a borrower defaults.
Constant offers 7% APY with no minimum investment. You choose the rate. If you’re looking to invest with low risk, get started with MyConstant today.
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