An investment portfolio in an era of soaring inflation, rising interest rates, the threat of an impending recession, and unpredictability in the marketplace will likely look at low-risk investing options with more promise. As you ride out volatility, low-risk investments are where it’s at. However, the downside to low-risk exposure is lower returns in the long term.
Here are the best low-risk investing options to maximize interest and preserve long-term growth.
Option #1: High-Yield Savings Account
A high-yield savings account will provide modest returns while safeguarding your investment. Many banks offer promotional interest rates for registering a savings account, so look around and compare offers. A high-yield savings account is one of the safest ways to hang onto your money, government-insured to a limit, although inflation can erode its value over time.
Option #2: Investing In Mortgages
Mortgage investing does not require a large upfront investment. A mortgage investment can provide monthly income and high returns. This is not investing in land or buying a property. It’s about investing in the mortgage itself. If a borrower fails to repay the loan, you assume property ownership and can sell it for profit.
You can invest in mortgages by various means, such as public mortgage funds, private mortgage funds, and mortgage syndication. Each option is worth exploring if you’re searching for the best low-risk investing option.
Option #3: Guaranteed Investment Certificates (GICs)
GICs offer some of the best returns of all the investments out there. They have a set interest rate and a set term, typically up to 5 years. The higher the term, the better the return. However, if you cash out early, you incur a penalty which can eat into your profits or savings. Therefore, if you’re investing in a GIC, ensure you are prepared to leave the money there for the full schedule of the term.
Option #4: Low-Risk Dividend-Paying Stocks
Stocks are not safe, but they are less risky than options and futures. Dividend stocks are among the safest. However, they aren’t high-growth. With a dividend stock, you receive passive income, which can help minimize the volatility risk. That said, there is still a risk, as with any stock. Be sure to research prior and consider utilizing a financial advisor before delving into stocks if you aren’t experienced.
Option #5: Index Funds For Passive Investors
Index funds are a subcategory of mutual funds. They passively track a specific market index of funds, stocks, and bonds. Index funds are diverse and offer consistent returns year-over-year. That said, index funds aren’t a way to generate profit quickly. They’re more attuned to long-term growth, but their ultimate benefit is that risk is spread out across multiple stocks, preventing any single loss from drastically hurting your portfolio.
Option #6: Mutual Funds And RRSPs
Mutual funds are money from investors, stocks, bonds, and other assets. They can be invested in through one’s RRSPs, allowing you to save money and diversify your portfolio. As these are diverse packs of assets, mutual funds can be very low-risk. You also do not need to actively manage anything. Mutual funds are frequently divided into niches, i.e., technology stocks, eco-friendly assets, etc.
Option #7: Exchange-Traded Funds (ETFs)
Exchange-traded funds are similar to index funds and can be index funds. Dividend ETFs offer high-interest rates, a steady source of income with routine payments, and are usually made up of companies with strong backing power. There are excellent ETFs and some that are not so well. Look at history and research before investing.
Option #8: Purchasing Bonds
Bonds are a way to buy a loan from a source and receive interest rates gradually on the schedule assigned to the bond. The most common bonds in Canada are government bonds, municipal bonds, high-yield bonds, and corporate bonds. While stocks rely on a company having value, bonds aren’t influenced by a company’s value. The longer you keep your bonds, the higher your return. They can be held anywhere from a year to 30 years.
Option #9: Real Estate Investment Trusts (REITs)
REITs are starting to step out into average-to-high-risk investing options, depending on where you invest your money. That said, there are certainly some lower-risk REITs out there that are worth a look. REITs are companies that pool together investor money to buy, develop, and manage real estate. A REIT investment does not appreciate. However, they pay strong dividends to shareholders and often at a rate higher than dividend stocks.
Option #10: Investing In Commodities
Commodities are volatile, and their prices can swing wildly. However, they are essential to the economy. Assuming you are alright, leaving the funds in your investment asset and will not need to withdraw at a moment’s notice, commodities like wheat, soybeans, corn, oil and natural gas, or metals like gold, silver, and copper can retain value and grow over time.
