Growing your net worth is a combination of spending less and finding new ways to earn more money.
Most wealthy individuals have more than one stream of income. Diversifying your investments and income becomes critical when you have only limited hours in a day to work for earned income.
If investing sounds difficult or scary, it doesn’t have to be. You can get started with low-risk investments that add to your passive income. Plus “low-risk” doesn’t have to mean “low-return.”
Losing money isn’t great when it comes to the investment game. Try one or more of these eight low-risk investments with the potential for big returns!
1. Open a Savings Account
This one might seem like a no-brainer. But it’s surprising how many people have only a checking account.
You’re missing out on interest payments if you don’t have a savings account.
This is one of the lowest-risk investments you can make. Savings accounts never lose money or value.
Open a savings account and add to it as often as you are able to put more money into the account.
Your interest payments might start small. Over time, you’ll earn more money on the account as the amount of money in the account grows.
Choose a high-yield savings account to get more interest returned to you.
2. Invest in Dividend-Paying Stocks
Depending on the type of stocks you choose, you can minimize your investment risk.
Stocks are generally safer than precious metals, venture capital, futures, or options where fluctuations in value can be more severe.
There is more risk involved than with a savings account. But dividend-paying companies are often mature and stable. They are steady ships that offer dividend payments along with regular income from the company’s stock.
If you’re making a first venture into stock investments, dividend-paying stocks are a solid investment. They usually remain steady when other higher-risk stocks fluctuate greatly as the market rises and falls.
3. Ask About Annuities
There is rightly some fear and skepticism associated with certain types of annuities.
However, if you have a trusted financial planner who can lead you to the best annuities for your needs, strongly consider adding one to your portfolio. Annuities are low-risk if purchased under expert advisement.
Purchase an annuity with retirement in mind. After you retire, you are eligible for payouts from your annuity.
Beware of high fees. This is where your trusted financial planner comes in to play.
Let your financial planner direct you to the right annuities for your retirement plan. They’ll help you avoid the annuities with the highest fees, the right payment schedule, and the best payout for you down the road.
4. Use Credit Card Rewards
Here’s another simple way to add some cash or perks back into your wallet.
Most credit cards offer some form of rewards. Those rewards often go unclaimed!
If miles or points motivate you, find a card that gives you the highest points you can earn. Be sure those points don’t go to waste. Cash in on airfare or other ways to spend your rewards.
If cash speaks to you, look for cards that offer cash back as a percentage of what you spend during each cycle.
To get the highest return on reward credit cards, pay your balance off each month. You’ll save the monthly interest fees while earning cash back or rewards points on your purchases.
Making money on credit card purchases is just one way to earn a little extra cash. Click here to learn how to make money in other simple ways.
5. Check Into Certificates of Deposit
Certificates of Deposit are another long-term investment strategy.
When you purchase a Certificate of Deposit (or CD), your bank promises to pay you a set amount of interest over the term of the CD–as long as you leave the CD intact.
It’s a low-risk investment if you are able to avoid removing any money from the CD before the end of the term.
Even if you remove money early, your biggest risk is losing some of the promised interest.
But be sure you are familiar with the terms of the CD before you purchase one or remove money early. In some cases, banks also penalize you with a loss of a percentage of the principal amount.
6. Buy U.S. Savings Bonds
This type of investment almost seems old-school. However, U.S. Savings Bonds are still alive and well today.
Choose between Series I and Series EE bonds. The difference is the type of rates associated with the bond.
U.S. Savings bonds are low-risk because the chance of default is low. The longer you hold on to a bond, the greater your return. Bonds can also help when it comes to taxes.
7. Make the Most of Money Market Funds
If one type of bond or CD doesn’t seem right for you, choose a Money Market Fund.
These funds are pools of low-risk bonds, CDs, and other kinds of low-risk investments grouped together by brokerage firms.
Unlike CDs, you won’t risk a penalty if you take money out ahead of the term of the fund.
8. Try Peer-to-Peer Lending
Although it might sound scary, Peer-to-Peer lending is relatively low-risk.
Join an online lending group that handles finding loans and collections for you. You manage the risk of your investment by reviewing and approving all loans.
Each loan earns interest back for you.
Do your research on the best lending club for your needs. Be sure you choose a partner that offers protections to get your money back from all loans.
Add Low-Risk Investments to Boost Your Income
Any investment opportunity comes with a certain amount of risk. But if you’re careful, adding low-risk investments to your portfolio can boost your income.
These options are a great way to earn some additional short-term or long-term money without taking on an extra job.
If you’re looking forward to retiring early, read more about some great investments to help you achieve that goal.