5 Low-Risk Investments to Add to Your Portfolio

Whether you’re getting closer to retirement age, have a child who’s approaching college age or simply are not comfortable with putting your money in certain types of investments, there are times when you might want lower-risk options.

While low-risk, high-return investments may not be possible, consider these five opportunities where your investments can provide growth with lower risks of losing value.

1. Annuities

With an annuity, you first have an accumulation phase, where you either invest a lump sum or make periodic contributions, depending on the type of annuity you own. In return, in the payout phase, you are sent payments on a certain schedule for a fixed period, amount or for the rest of your life.

You may be interested in an annuity to supplement your retirement income and to safeguard against the potential risk of outliving your assets.

Annuities can be complicated, and they have tax ramifications, so you’ll want to make sure you fully understand the pros and cons before you invest in one.

2. Treasury Bonds

Also called T-bonds, treasury bonds are securities issued by the federal government that pay interest every six months until they mature. The interest rate doesn’t change over the life of the bond. They are considered relatively risk-free based on the full faith and credit of the U.S. government. When they mature, it’s likely you will get your original investment back.

You might want to consider treasury bonds to set aside money for a major expense like a college education or to protect some of your retirement savings from risk.

Keep in mind that treasury bonds are not the same as U.S. savings bonds.

3. Corporate Bonds

Corporate bonds are debt securities that a corporation  issues to investors. According to the Securities and Exchange Commission, the corporation can use the money to grow, acquire other companies or pay for business needs. They work in a similar way to treasury bonds in that you buy them, collect interest payments over the term of the bond and typically get your initial investment back when held to maturity.

One of the risks  of corporate bonds depends on the financial stability of the corporation that’s  issuing them. The safest corporate bonds, triple-A bonds,  offer lower interest rates while high-yield or “junk” bonds,  carry more risk but offer higher returns. 

4. Bond Mutual Funds

Bond mutual funds are invested in debt instruments issued by governments and/or corporations.  They may offer greater portfolio diversification than you  might achieve if you were buying individual bonds on your own. 

You can choose different degrees of risk with bond mutual funds, with higher-quality bonds paying lower interest rates. You can also choose to invest in short-term, medium-term or long-term bonds, so you can choose the timeframe that works best for you. 

5. High-Yield Savings Accounts

A high-yield savings account (HYSA) is a savings account that pays higher rates than an average savings account. The money you put in this account is insured by the Federal Deposit Insurance Corporation (FDIC) for banks or the National Credit Union Association (NCUA) for credit unions up to the applicable limits.

It’s usually easy to transfer or withdraw money from a HYSA. It may be a good choice for your emergency savings or for savings you’re putting away for a goal like a car or a down payment on a house.

Professional Guidance Can Help You Meet Your Goals

When you’re looking for low-risk investments for retirement or other goals, it can help to talk to a professional. The team at Farm Bureau can review your goals, help you evaluate your risk and develop an investment plan that works for you. Reach out today for a no-strings consultation.