When most people first start investing, they are much more concerned with not losing any of their money than they are with generating a high return. When you’ve never invested money before it’s easy to be anxious about the prospect of a second Great Depression the day after you buy your first stock. Although the odds of this happening are microscopic, it can still make you feel better to start with low-risk investments.
This begs the question, which type of investment has the lowest risk?
Treasury bills
Treasury bills are an asset offered by the government that are very similar to bonds. The government sells treasury bills in order to raise money for public projects and then pays the holder a very small amount of interest when the T Bill matures.
Since they are backed by the full faith of the United States government, there is essentially zero risk of not getting your money back if you buy a treasury bill. However, the tradeoff is that they do not pay you a very right rate of return.
Precious metals
Precious metals like gold, silver, platinum, and palladium have long been considered very solid stores of value. In particular, gold is known for retaining its value better than almost any other asset in history. This is why investors will usually flock to gold during times of economic uncertainty.
There are two ways that you can buy gold:
- Buying the real thing – Purchasing physical gold can be done through any reputed broker.
- Gold ETF – A Gold ETF is like a stock that tracks the spot price of gold and gives your portfolio exposure to the price of the metal without actually needing to buy it.
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High-yield savings account
When you keep money in a savings account, you are still earning a very small percentage in interest each year. Although you will not earn a very high amount in interest, the tradeoff is that there is a very, very low risk of losing your money. If you lose the money that you have in a savings account then it probably means that our entire banking system is collapsing (and then we have much bigger problems to worry about).
Regular savings accounts will pay you about .05% in interest each year, which really isn’t a lot at all. However, high-yield savings accounts offered by online banks pay closer to .5% interest. This means that $10,000 left in a savings account for one year will generate about $50 by the end of the year.
However, this route of investment is not simple as this. You will need to factor in inflation rates and tax you will need to pay on income generated from this interest. It’s always best to look into your local tax and inflation rates to calculate this return on investment.
All three of these assets have incredibly low risk and are a great way to introduce yourself, and your bank account, to the concept of investing. Again, the tradeoff is that you should not expect to generate very significant returns with any of these assets.
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