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5 Low Risk Investments For Beginners

The best advice about newcomers wanting to delve into the investment world is to start slow, and start small. Investing in low risk options, which in turn offer low return investments such as time deposits, money markets, very stable stocks and bonds will get your feet wet and keep you from losing your savings.

Money Market mutual funds

These funds are safe, and many offer great interest rates. These funds are shareholder funds, meaning that there are many different funds, sometimes hundreds held by many different people. Brokerage firms and banks offer these types of investments and most are short term, which offer liquidity and high quality stocks.

Time deposits

These are funds offered by most banks, and shopping around can get you the best interest rate return. The longer the term, the better the interest rate. Deciding which bank offers the best interest rate is first priority, and then checking the stability of the bank is another factor to consider. Also, make sure the funds are FDIC/CDIC insured because most banks offer this insurance and the risk is nil when your investment is insured.

Closed end investment funds

These funds are an actively managed portfolio of securities that hold a fixed number of shares that are traded on the market, like stocks, which mirror mutual funds. The main difference is that these shares are priced by supply and demand, not net asset value.

The best part of closed-end funds is that they are generally specialized in geographic regions, offer a specific investment focus and are not diversified to the overall market. And, there are literally hundreds to choose from, all different and offering capital appreciation as well as dividends.

The rules vary greatly from fund to fund, so make sure you understand their prospectus before you put your hard earned money into one, but these funds are in the low-risk category.

Municipal bonds

These debt securities are issued by state and county to fund their capital expenditures such as highways, schools, bridges and similar repairs and improvements that are required. These can be purchased through any full-service broker, and some discount brokers offer them as well. Some offer a larger investment of thousands of dollars, some less, and some even pool together (municipal bond funds) which diversify the bonds, and allow for more lucrative investments.

They offer great tax incentives and are a great way to dodge the high taxes on investments.

Municipal bonds come in two different types, public purpose and private. The public is for government purposes and are tax exempt. The private are only tax exempt on specific bonds. Make sure you check the tax status before jumping on board.

They are low-risk and offer capital appreciation and low yields; however, they are a fairly stable investment. The state in which you purchase your bond will depend on the credibility of its value and risk.

Common stocks

Sometimes also referred to as stocks, shares, securities and equities. This is an investment in stock in a specific company, also known as partial ownership in a company. This is a great way to invest because if the company grows, so do your assets. These stocks even allow you voting rights on matters pertaining to the company, and your vote capacity is the percentage of the stock you own.

These are long-term investments and offer a reasonable risk, but they also offer some pretty great returns, and outperform most other security bond and preferred share investments. The potential for capital appreciation and income grow as the company grows, so choosing the right company will take some research, because if the company folds, common stockholders are generally the last to get paid.

These stocks can be bought through both full service and discount brokers, and the minimum investment is what they cost per share, although some brokers may expect at least a $500.00 investment to open an account.

Preferred stock

This is another stock that offers ownership in a company, but lacks the voting rights. Preferred stocks offer a fixed dividend, and are paid forever as long as the company remains in business. It is also a little safer than common stock in that your stock will be paid off before common stockholders should the company go under or experience financial trouble.

These stocks pay higher dividends than common stock, and are less volatile, but because they are fixed people tend to opt for the common stock with its attractive variable rate, which is more lucrative, should the company boom.

These stocks can be purchased through a full service or discount brokerage company, with no minimum investment.

Doing the research is the best way to keep your portfolio safe and strong. Keep your investments low, and don’t invest too much in one place, say the experts. Buy a good book, or find an amazing broker who is willing to teach, so that you gain the experience to get in a little further, slowly.

Good luck!

Kristy Ramirez writes for Life Insurance Finder where she helps people to compare life insurance quotes and select the best policy to meet their needs at the best possible price.

{ 2 comments… read them below or add one }

Lose Weight Paleo November 6, 2011 at 7:56 am

When I was about 12 years old or so [a few years ago], my doctor suggested weightloss. He reccomended that I tried the South Beach diet [you know, the one where you cut carbs out completely!] Why would he do this rather than educate me on healthy lifestyle changes?.


OEM Adobe Creative Suite 5 Master Collection MAC November 9, 2011 at 1:35 pm

I want to say thank to the blogger very much not only for this post but also for his all preceding efforts. .


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