Safest Investments: 11 Low-Risk Investments for 2024 (2024)

In today's volatile markets, many investors are looking to put at least some of their money into safer, more stable assets. While high-risk investments offer the potential for bigger returns, they also come with a greater chance of losing your principal. For those seeking reasonable profits without as much uncertainty, here are some of the best low-risk investment options to consider this year.

Some investment categories are consistently safer than others. For example, certificates of deposit (CDs), money market funds, municipal bonds and Treasury Inflation-Protected Securities (TIPS) are among the safest types of investments. Below, we list these and other conservative investments that can help you preserve capital

Key Takeaways

  • Safe assets are those that allow investors to preserve capital without a high risk of potential losses.
  • Such assets include treasuries, CDs, money market funds, and annuities.
  • There is, of course, a risk-return tradeoff, such that safer assets typically offer comparatively lower expected returns.

The Risk/Reward Tradeoff

When making investment decisions, there is always a tradeoff between risk and return. Generally, assets with higher potential returns also come with greater risk. The key is finding the right balance for your goals and risk tolerance.

At one end of the spectrum are low-risk investments like savings accounts, CDs and high-quality bonds. These provide modest but stable returns with minimal risk of losing your principal. The gains, however, may not keep pace with inflation.

On the other end are higher risk investments like stocks, commodities, high-yield bonds and alternative assets. These have potential for much higher returns, but have significant volatility and a real risk of major losses.

Most experts suggest constructing a diversified portfolio that includes a mix of low, moderate and high risk assets. The exact allocation depends on factors like your investment time-frame, goals, age and psychological comfort with risk. Younger investors with longer time horizons can often take on more risk, knowing they have time to recover from periodic downturns in volatile assets. Older investors nearing retirement may shift toward more low-risk securities to preserve capital. No matter your risk tolerance, some mixture of safer and riskier assets is advisable. Having at least some holdings with high return potential provides opportunities for growth. Maintaining sufficient stable investments hedges against volatility while still providing income.

Finding the right balance ultimately comes down to your specific situation and risk tolerance. Be sure to thoroughly assess your goals, timeline, and psychological & emotional ability to handle swings in portfolio value. And don't forget to diversify across asset classes to avoid overexposure to any one type of risk.

Cash

Cash, including demand cash deposits, represents the epitome of safety in the asset world. There's virtually no risk of loss (unless it is lost or stolen), making it a very reliable asset. However, its safety comes at a cost – it generally yields minimal returns, especially when considering the erosion of purchasing power due to inflation.

Cash is ideal for immediate or short-term financial needs due to its unparalleled liquidity. It's perfect for maintaining an emergency fund or paying for immediate and upcoming expenses. Indeed, the most significant benefit of holding cash is that it is instantly accessible and pretty much universally accepted.

High-Yield Savings

High-yield savings accounts offer a low-risk bank account option, but with higher interest rates than regular savings accounts. Online banks that have lower overhead expenses compared to traditional brick-and-mortar banks are often able to offer such products with attractive rates.

These accounts are ideal for short-term savings goals where you want to earn a bit more interest than a regular savings account without compromising on safety. One major perk is FDIC insurance, which covers potential losses of up to $250,000 per institution and the ability to withdraw funds at any time, providing both security and liquidity. To get one, simply open an account with a bank that offers high-yield savings accounts.

Money Market Funds

Money market funds are low-risk as they invest in stable, short-term debt instruments and certificates of deposit. Though rates are still relatively modest, they usually offer higher yields than savings or money market accounts. Fund shares are targeted to $1 per share. Returns are variable based on holdings, and money market funds are not FDIC-insured. These funds are suitable for investors seeking a bit more yield than a savings account but who also value liquidity and safety.

To invest, one must buy shares in a money market fund through a brokerage or a mutual fund company.

Money market funds and money market accounts are two common low-risk savings vehicles that are often confused with each other. Money market accounts are FDIC insured up to $250,000, while money market funds do not offer FDIC protection.

Certificates of Deposit (CDs)

CDs are low-risk, FDIC-insured investments that offer fixed interest rates over a set period (often six months to five years). Their returns are usually higher than savings accounts, but still fixed and predictable. CDs can be well-suited for investors who don't need immediate access to their funds and are looking for relatively higher, guaranteed returns over a specific period.

To invest, purchase a CD through a bank, choosing the term and rate that best fits your financial timeline.

Treasuries

Treasury securities like T-bills and T-notes are very low-risk as they're issued and backed by the U.S. government. They provide a safe way to earn a return, albeit generally lower than aggressive investments. Treasuries are generally considered"risk-free" since the federal government guarantees them and has never (yet) defaulted.

These government bonds are often best for investors seeking a safe haven for their money, particularly during volatile market periods. They offer high liquidity due to an active secondary market. You can purchase these securities through your broker or via the government's TreasuryDirect website.

TIPS

TIPS (Treasury Inflation-Protected Securities) offer low-risk investment opportunities, with the added perk of its principal adjusting with inflation, thus providing a hedge against inflation. Like treasuries, these are also backed by the US government.

TIPS offer high liquidity and inflation protection, but can underperform during periods of low inflation or when real interest rates are rising, as their value is directly tied to inflation trends. Additionally, their returns may not be as high as other fixed-income securities in a stable or deflationary economic environment. You can buy TIPS through TreasuryDirect or your brokerage account.

AAA Bonds

Investment grade bonds, particularly short-duration ones and those with the highest AAA-rating, are considered low to moderate risk. They are highly rated, indicating a lower default risk, and offer moderate returns. Still, bond prices are sensitive to interest rate changes and can become riskier if the issuer faces financial troubles or insolvency later on.

Corporate bonds are suitable for investors seeking steadier, but potentially higher returns than government securities, with a reasonable level of risk (depending on the bond). To invest, buy these bonds through a brokerage account.

Bond Funds

Bond funds, which are managed portfolios of various bonds packaged into mutual funds or ETFs, have low to moderate risk, depending on their particular investment strategy. Diversification within the fund reduces risk, and returns are generally steady. These are particularly attractive for investors looking for diversified bond exposure without having to buy individual bonds.

You can buy bond funds through mutual fund companies or brokerage accounts.

Municipal Bonds

Municipal bonds are low to moderate risk and are funded by tax collection or other government revenues (such as toll roads or bridges). They can offer tax-free income at the federal (and sometimes state & local) level. As such, "munis" are particularly attractive to investors in higher tax brackets.

A drawback is that munis are somewhat illiquid, with a less active secondary market compared to other securities. To invest, buy municipal bonds through a specialized municipal bond dealer, or in some cases, directly from the issuing municipality. Municipal bond funds are also available, they may be more liquid, but may not cater to your particular tax situation.

Annuities

Annuities are low-risk investments that provide fixed, steady income in return for an upfront investment -- guaranteed either for a set period of time, or for life. The returns are backed by the insurance company issuing the annuity. However, the funds put into an annuity are often locked up or exchanged for the flow of future cash flows. Therefore, they are not liquid. Indeed, annuities are often best suited for older individuals looking for a steady, guaranteed income stream, particularly during retirement.

The process of buying involves selecting an annuity type and making an investment through an insurance company or agent.

Cash-Value Life Insurance

Cash Value Life Insurance is a unique financial product that combines the protection of life insurance with the benefit of a savings component. The risk level is generally low, as it not only guarantees a payout to beneficiaries upon the policyholder's death but also allows the cash value to grow at a set interest rate and without the risk of loss, often tax-deferred. This growth rate is often more favorable compared to traditional savings vehicles, though it typically offers lower returns than more aggressive investment options.

The cash value grows tax-deferred, and beneficiaries receive the death benefit tax-free. Additionally, policyholders can borrow against the cash value tax-free, though loans can reduce the death benefit and cash value.

This type of insurance is best suited for individuals who are looking for a long-term investment that provides both a death benefit and a potential cash accumulation. It's particularly appealing to those who have maximized other retirement savings options and are seeking additional tax-advantaged ways to save. It can also be a strategic tool for estate planning.

Safe Investments at a Glance
InvestmentDescriptionRisk LevelWhy It's Low RiskLiquidity
CashCash or demand cash depositsVery LowNo risk of loss - however, it can lose purchasing power to inflationVery high - cash is the most liquid asset by definition
High-Yield Savings AccountsSavings accounts with higher interest rates than normal. FDIC insured up to $250k.LowFDIC insurance protects against lossesVery High - can withdraw funds any time
Money Market FundsMutual funds investing in short-term debt instruments. Higher yield than savings accounts.LowInvests in stable short-term assetsHigh - Shares can be sold daily
CDsCertificates of deposit pay fixed interest over set periods, usually 3 months to 5 years.LowFDIC insured, fixed ratesLow - Funds locked up until maturity; early withdrawal penalties
Treasury SecuritiesBonds issued by the US Treasury like T-bills, T-notes, savings bonds.Very LowBacked by US governmentHigh - Active secondary market
TIPSTreasury Inflation-Protected Securities. Bonds whose principal adjusts with inflation.LowBacked by US government; inflation protectionHigh - Active secondary market
Investment Grade BondsHighly rated corporate bonds. Short duration bonds are safest.ModerateHigh credit ratings mean lower default riskModerate to High - Can sell but may take time depending on the bond
Bond FundsBundles of bonds in mutual funds or ETFs provide diversification.Low to ModerateDiversification reduces riskHigh - Shares can be sold daily
Municipal BondsBonds issued by local governments to fund projects.Low to ModerateFunded by tax collection or other gov't revenueModerate - Secondary market not highly liquid
AnnuitiesInsurance contracts providing fixed income in return for an upfront investment.LowGuaranteed fixed payments from insurance companiesLow - Funds locked up, early withdrawal penalties
Cash Value Life InsurancePermanent life insurance with savings component.LowGuarantees payout to beneficiaries; savings grow tax-free at favorable dividend ratesModerate - Usually must request withdrawal or loan, or else surrender policy to access cash value

What Is the Safest Asset of All?

The concept of the "safest investment" can vary depending on individual perspectives and economic contexts, but generally, cash and government bonds, particularly U.S. Treasury securities, are often considered among the safest investment options available. This is because there is minimal risk of loss.

That said, it's important to note that no investment is entirely risk-free. Even with cash and government bonds, there is a risk of inflation outpacing the yield, leading to a decrease in purchasing power over time.

Why Is there A Risk-Return Tradeoff?

There are several reasons proposed for the risk-return tradeoff, which is a cornerstone concept of financial economics. It implies that lower-risk investments will also offer lower expected returns.

Higher returns are often required by investors as compensation for the increased uncertainty and potential for loss associated with riskier investments. When investors put money into an asset with a high level of risk, such as a new tech start-up, they face a higher chance of losing their investment. Therefore, they expect higher returns to justify this risk.

The time-value of money further states that money available now is worth more than the same amount in the future due to its potential earning capacity and opportunity costs. Riskier investments must offer higher returns to compensate for the possibility that the future value of the investment might be lower than expected or even negative.

Can Money Market Funds Ever Result in a Loss?

While money market funds are considered very low-risk, they are not entirely risk-free. Unlike bank savings accounts, they are not insured by the FDIC. There have been rare instances, such as during severe financial crises, where money market funds "broke the buck," meaning their value dropped below the target $1 per share, leading to losses for investors. However, regulatory changes have been made to increase their stability since the 2008 financial crisis.

Are There Any Safe Assets that Are Also Socially-Resonsible or ESG Conscious?

Yes, there are safe investment options that also consider social or environmental impacts. Green bonds, for example, are often issued by governments and corporations to fund environmentally-friendly projects. They typically carry lower risk, similar to other government or corporate bonds, while contributing to positive environmental outcomes. Additionally, some municipal bonds will finance projects with social or environmental benefits, combining safety with social responsibility.

The Bottom Line

Safe assets such as U.S. Treasury securities, high-yield savings accounts, money market funds, and certain types of bonds and annuities offer a lower risk investment option for those prioritizing capital preservation and steady, albeit generally lower, returns. While they may not provide the high returns of riskier assets like stocks, they play a crucial role in a diversified portfolio, offering stability, predictable income, and protection against market volatility. These assets are particularly appealing for risk-averse investors, those nearing retirement, or anyone looking to balance out higher-risk investments. However, it's important to be mindful of their limitations, such as lower returns that may not keep pace with inflation and the varying degrees of liquidity and tax implications. Ultimately, the choice of safe assets should align with individual financial goals, risk tolerance, and overall investment strategy.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Safest Investments: 11 Low-Risk Investments for 2024 (2024)

FAQs

What is the best investment in 2024? ›

11 best investments right now
  • High-yield savings accounts.
  • Certificates of deposit (CDs)
  • Bonds.
  • Money market funds.
  • Mutual funds.
  • Index Funds.
  • Exchange-traded funds.
  • Stocks.
Mar 19, 2024

Which stocks should I look out for in 2024? ›

Best Stocks to Invest in India 2024
S.No.CompanyIndustry/Sector
1.Tata Consultancy Services LtdIT - Software
2.Infosys LtdIT - Software
3.Hindustan Unilever LtdFMCG
4.Reliance Industries LtdRefineries
1 more row
Apr 9, 2024

What is the safest investment to not lose money? ›

The Bottom Line

Safe assets such as U.S. Treasury securities, high-yield savings accounts, money market funds, and certain types of bonds and annuities offer a lower risk investment option for those prioritizing capital preservation and steady, albeit generally lower, returns.

What is the safest investment with the highest return? ›

Here are the best low-risk investments in April 2024:
  • High-yield savings accounts.
  • Money market funds.
  • Short-term certificates of deposit.
  • Series I savings bonds.
  • Treasury bills, notes, bonds and TIPS.
  • Corporate bonds.
  • Dividend-paying stocks.
  • Preferred stocks.
Apr 1, 2024

Where do I put cash 2024? ›

1. High-yield savings accounts. Overview: A high-yield savings account at a bank or credit union is a good alternative to holding cash in a checking account, which typically pays very little interest on your deposit. The bank will pay interest in a savings account on a regular basis.

What is the safest investment right now? ›

  • Treasury Inflation-Protected Securities (TIPS) ...
  • Fixed Annuities. ...
  • High-Yield Savings Accounts. ...
  • Certificates of Deposit (CDs) Risk level: Very low. ...
  • Money Market Mutual Funds. Risk level: Low. ...
  • Investment-Grade Corporate Bonds. Risk level: Moderate. ...
  • Preferred Stocks. Risk Level: Moderate. ...
  • Dividend Aristocrats. Risk level: Moderate.
Mar 21, 2024

What stock is expected to skyrocket in 2024? ›

2024's 10 Best-Performing Stocks
Stock2024 return through March 31
MicroStrategy Inc. (MSTR)169.9%
SoundHound AI Inc. (SOUN)177.8%
Vera Therapeutics Inc. (VERA)180.4%
Avidity Biosciences Inc. (RNA)182%
6 more rows

What are the 5 star stocks for 2024? ›

Five-star analyst Scott Devitt of Wedbush has named Amazon (NASDAQ:AMZN), Meta Platforms (NASDAQ:META), Uber (NYSE:UBER), and Booking Holdings (NASDAQ:BKNG) as his top internet picks for 2024.

What stock will grow the most in 2024? ›

10 Best Growth Stocks to Buy for 2024
StockExpected Change in Stock Price*
Tesla Inc. (TSLA)61%
Mastercard Inc. (MA)14.2%
Salesforce Inc. (CRM)7.2%
Advanced Micro Devices Inc. (AMD)11.3%
6 more rows
Mar 25, 2024

What are 3 very risky investments? ›

While the product names and descriptions can often change, examples of high-risk investments include: Cryptoassets (also known as cryptos) Mini-bonds (sometimes called high interest return bonds) Land banking.

What investments should I avoid? ›

6 Tempting Investments You Should Avoid Some investments are just not worth it, and you should avoid these six kinds of investments like the plague.
  • Whole life insurance. ...
  • Low-interest saving accounts. ...
  • Penny stocks. ...
  • Gold coins. ...
  • Hyper-aggressive growth mutual funds. ...
  • Complex private limited partnerships.
Dec 12, 2022

What is the safest and best way to invest $100000? ›

Best Investments for Your $100,000
  • Index Funds, Mutual Funds and ETFs. If you're looking to invest, there are a lot of options. ...
  • Individual Company Stocks. ...
  • Real Estate. ...
  • Savings Accounts, MMAs and CDs. ...
  • Pay Down Your Debt. ...
  • Create an Emergency Fund. ...
  • Account for the Capital Gains Tax. ...
  • Employ Diversification in Your Portfolio.
Dec 14, 2023

Should a 70 year old be in the stock market? ›

Conventional wisdom holds that when you hit your 70s, you should adjust your investment portfolio so it leans heavily toward low-risk bonds and cash accounts and away from higher-risk stocks and mutual funds. That strategy still has merit, according to many financial advisors.

Which investment is best for senior citizens? ›

Best Investment Options For Senior Citizens In India
  • Best Investment Plan for Senior Citizens.
  • ‌Senior Citizen Saving Scheme (SCSS)
  • Pradhan Mantri Vaya Vandana Yojana.
  • National Pension System (NPS)
  • Equity Linked Savings Scheme (ELSS)
  • Senior Citizen Fixed Deposits.
  • Why is Investing for Senior Citizens Important?

Which investment gives highest return with low risk? ›

Best Low-Risk Investments With High Returns
  • Debt-focused Unit Linked Insurance Plans (ULIPs) ...
  • Treasury Bills. ...
  • Fixed Deposits. ...
  • Series I Savings Bonds. ...
  • Corporate Bonds. ...
  • Preferred Stocks. ...
  • PPF (Public Provident Fund) ...
  • Gold. Investment in gold is by far the best low risk high return investments.
Jan 29, 2024

What stock will boom in 2024? ›

2024's 10 Best-Performing Stocks
Stock2024 return through March 31
Avidity Biosciences Inc. (RNA)182%
Arcutis Biotherapeutics Inc. (ARQT)206.8%
Janux Therapeutics Inc. (JANX)250.9%
Trump Media & Technology Group Corp. (DJT)254.1%
6 more rows

How are people making money in 2024? ›

Money making apps like DoorDash, UberEats, and GrubHub make it easy to accept delivery gigs from restaurants in your area. You can get paid an hourly rate plus tips for your time. If you'd prefer to deliver groceries or other items from local stores you might check out Instacart, Shipt, or Postmates instead.

Will 2024 be a good year for the stock market? ›

Stocks and bonds may both be poised for success in 2024. Easing inflation and a pivoting Fed should reduce headwinds that have faced both asset classes in recent years.

Where to invest $50,000 for 3 years? ›

7 Ideas for How to Invest $50,000
  • High-Yield Cash Account. Considered one of the safest investments, a high-yield cash account can potentially keep your money safe. ...
  • Tax-Advantaged Investment Account. ...
  • Taxable Investment Account. ...
  • Real Estate. ...
  • I-Bonds. ...
  • Precious Metals. ...
  • Alternative Assets.
Apr 4, 2024

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