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12 Best Low-Risk Investments for Your Money


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You know all the rules for getting ahead financially. You know it’s important to keep your expenses under control, minimize debt, and save as much of your salary as you can. If you stick to these rules for long enough, you’ll end up with a nice big balance in the bank. 

Then what? If you leave it in the bank, your money stays safe and accessible. But at today’s interest rates, it won’t earn much. Is there a better option that doesn’t put your money at risk?

The answer is yes. In fact, there are several low-risk investments that offer higher returns than an ordinary savings account. But in general, the ones with the lowest risk also offer the lowest returns. The best investment for you is the one that strikes the right balance of risk to reward.

Best Low-Risk Investments

When comparing investment options, there are several factors that matter. These include safety, returns, and liquidity — that is, how easy it is to access your money. How you weigh those factors depends on what you’re saving for.

For short-term savings that you might need to draw on at any time, such as your emergency fund, liquidity and safety are the top priorities. For a vacation fund, you can afford to sacrifice a little liquidity and safety for a higher return. You don’t need the money right away, and if you lose a little, you can just take a cheaper vacation. (And if you do well, you can take a fabulous one.)

If you’re saving for a medium-term goal that’s a few years off, such as a wedding or a down payment on your first house, liquidity matters less. You can afford to tie up your money over a longer period of time if it gets you a better return.

For long-term investments, such as retirement savings, your top priority is to grow your money over the long term. It makes sense to take some risks with your money in the short term if it gives you better growth overall.

However, even for this type of investment, it makes sense to include some lower-risk options in your investment portfolio. They help balance out your higher-risk investments and protect your capital.

These are some of the best low-risk investments to consider for different needs.


1. High-Yield Savings Accounts

Best for emergency fund or everyday savings

  • Average Return: About 0.5% APY (as of December 2021)
  • Risk: Your investment is guaranteed, but can lose value to inflation

Perhaps the simplest and most convenient place to store your money is a basic savings account. Savings accounts at traditional banks, online banks, and credit unions are almost completely liquid. You can get your money out at any time, through any branch or ATM. 

They’re also about as safe as any investment can be. The FDIC insures all bank accounts up to $250,000. The NCUA insures accounts with credit unions for the same amount. So even if your bank or credit union goes out of business, you’re guaranteed to get your money back.

The downside is their low return. A high-yield savings account can pay as much as 1% APY, which is much better than most savings accounts. But it’s still nowhere near enough to keep up with inflation. So this is not a good way to grow your savings over the long term.


2. High-Yield Money Market Accounts

Best for money you draw on at regular intervals

  • Average Return: 0.06% APY (based on FDIC figures for November 2021)
  • Risk: Your investment is guaranteed, but can lose value to inflation

A money market account is like a cross between a checking account and a savings account. Unlike savings accounts, these accounts generally come with both a debit card and old-fashioned paper checks. But they limit you to six withdrawals or transfers per month. 

Money market accounts are backed by the FDIC or NCUA, making them very safe. However, their typical interest payments are lower than you’d get from a high-yield savings account. That means they tend to lose even more value to inflation over time.

A money market account is a handy place to keep funds you need to write checks from occasionally. For instance, you could write one check on the account each month to pay your rent or utility bills.


3. Certificates of Deposit (CDs)

Best for short-to-medium-term investments, depending on term of CD

  • Average Return: Varies by CD term, ranging from 0.02% for one month to 0.24% for five years (based on FDIC figures for November 2021)
  • Risk: Your principal is guaranteed, but you can lose your returns if you withdraw early

A certificate of deposit, or CD, is basically a fixed-term loan that you make to your bank. You agree to lend the money for a set amount of time, and the bank guarantees you a fixed amount of interest when this term is up. Like other bank accounts, CDs are FDIC- or NCUA-insured. 

CDs at most banks and credit unions vary from as short-term as three months to as long-term as five years, but some financial institutions offer even shorter or longer terms. The longer the term of the CD, the more interest it pays. However, longer-term CDs also tie your money up longer. If you withdraw it early, the bank typically charges a penalty that cuts into your earnings.

You can get around this problem by creating a CD ladder. You split up your investment among several CDs with different terms, such as one, two, three, four, and five years. That makes some of your money available sooner while some of it earns higher interest.


4. Money Market Funds

Best for emergency funds or savings you could need at a moment’s notice

  • Average Return: Between 0% and 0.3% APY (as of December 2021)
  • Risk: Very low, but your principal is not guaranteed

A money market fund is not the same as a money market account. It’s a type of bond mutual fund that you usually open through a brokerage, although some banks offer them too. These funds are not FDIC-insured, and they can come with fees that eat into your return.

Money market funds invest in other low-risk investments, such as CDs and short-term municipal, corporate, or government bonds (discussed below). These investments don’t have the same fluctuations in value as the stock market, so they keep your money safe.

Unlike CDs, money market funds are fully liquid, so you can add or remove money at any time. 

And they generally offer better returns than savings accounts or money market accounts. However, their returns are usually still too low to keep up with inflation.


5. U.S. Treasury Securities

Best for short-to-medium-term investments, depending on term of security

  • Average Return: Varies by term, ranging from 0.5% for two months to 1.85% for 20 years (based on official U.S. Treasury rates as of November 2021)
  • Risk: Very safe, but can lose value to inflation

Just as you can lend to a bank with a CD, you can lend to the U.S. government by buying Treasury securities. These government bonds are very safe investments, offering a guaranteed, fixed interest rate. You can buy them online at TreasuryDirect.gov.

U.S. Treasury securities, or Treasuries, go by three different names. Treasury bills are the shortest-term, maturing in one to 12 months. Medium-term Treasury notes mature in one to 10 years. The longest-term are Treasury bonds, with terms as long as 30 years. Longer-term Treasuries offer higher yields because they tie up your money longer at a fixed interest rate.

Treasuries give a safe, guaranteed return that usually beats bank and money market rates. However, it can’t generally beat inflation. And the highest yields require tying up your money for decades, meaning you’ll lose out if interest rates rise.


6. Treasury Inflation-Protected Securities (TIPS)

Best for long-term investments and inflation protection 

  • Average Return: Varies, but yields are guaranteed to keep pace with inflation
  • Risk: Very safe, and cannot lose value due to inflation

Most low-risk investments don’t pay enough to keep pace with inflation. Treasury inflation-protected securities, or TIPS, are a way around this problem. With TIPS, the actual value of your investment changes based on the inflation rate.

Every six months, your TIPS pay a fixed rate of interest. At the same time, the value of your bond changes to adjust for inflation. That guarantees that both your principal and your interest payments maintain their value during periods of high inflation.

TIPS pay a little less interest than other Treasuries. However, their unique features mean they hold their value better when inflation is rising. TIPS can also lose value if deflation occurs, but this rarely happens. You can purchase TIPS through TreasuryDirect.gov.


7. Municipal Bonds

Best for long-term investments and tax-advantaged income generation

  • Average Return: From 0.2% to 7%, depending on type, municipality, and length of bond
  • Risk: Generally low, but higher than Treasuries or money market funds

A municipal bond is a loan you make to a city or town. Municipal bonds (munis for short) are a bit riskier than Treasuries because cities actually can go bankrupt. But because of their higher risk, they pay more interest. 

Many municipal bonds have a unique perk: the earnings from them are not subject to federal income tax. In many states, they are free from state and local tax as well. That makes them a good choice for long-term investors, especially those in high tax brackets. They also make a good income investment because they generate steady returns.

Instead of buying individual munis, you can buy shares in a municipal bond fund that invests in many different munis. This reduces your risk through diversification. There are exchange-traded funds (ETFs) that invest in munis as well.


8. Corporate Bonds

Best for long-term investments and decent income generation

  • Average Return: About 2% for the highest-grade (safest) bonds, but varies widely based on company and length of bond
  • Risk: Low to high, depending on the company and the term

A corporate bond is a loan to a business. These bonds vary widely in risk and return depending on the business doing the borrowing. The safest bonds, from big companies like Apple or Google, offer fairly safe but modest returns. 

The riskiest corporate bonds, called “junk bonds,” offer very high yields, but there is a real risk of losing your money if the company goes bankrupt. On average, corporate bonds are a bit riskier than munis and therefore pay a bit more. You can also reduce your risk by investing in corporate bond funds or ETFs rather than individual bonds.

Another risk with long-term bonds is that interest rates will rise and you will be stuck with a low-paying investment. You can sell your bond before it matures, but its value will fall if interest rates have risen. You can reduce this risk by sticking to shorter-term bonds.


9. Fixed Annuities

Best for providing guaranteed income in retirement

  • Average Return: Varies by term; between 2% and 3.25% over two to 10 years as of December 2021
  • Risk: Very safe, but may lose value to inflation

A fixed annuity is like a CD sold by an insurance company. It ties up your money and provides a guaranteed return over a period of time. This can be as little as two years or until your death.

With some annuities, you pay a lump sum up front and start getting income immediately. With others, you pay into the annuity over time and it starts paying out on a certain date, such as when you retire. Annuity contracts can be very complex, so it’s important to read them carefully.

Fixed annuities provide a safe, guaranteed income. However, their returns are fairly low and may not keep pace with inflation. Also, they tie up your money for a long time. If you need to cash in your annuity early, you’re likely to pay a penalty.


10. Preferred Stocks

Best for long-term or income investment 

  • Average Return: Between 5% and 7%
  • Risk: Fairly low — safer than common stock but riskier than bonds

Investing in the stock market is generally risky. However, preferred stocks are safer than other stocks. They’re more similar to bonds, paying out a regular cash income over a period of time. But they also offer some of the potential for growth you get from regular stocks. You can buy them directly or invest in preferred stock index funds and ETFs.

A preferred stock pays out a regular quarterly dividend. In rare cases, a company can suspend the dividend temporarily, but companies try to avoid this. Those that do it often have to make up the missed payments later.

Preferred stocks are a middle ground between the high returns of stocks and the lower risk of bonds. They grow slower than other stocks, but they provide a fixed return that’s usually higher than a bond’s. And some preferred stocks qualify for lower tax rates than other investments.


11. Dividend Stocks

Best for long-term growth and investment income 

  • Average Return: Between 2% and 5%, but high-value dividend stocks offer 6% or more
  • Risk: Low to medium

Preferred stocks aren’t the only ones that pay dividends. Many common stocks do as well. However, they’re a bit riskier because their dividends rise and fall with the value of the stock. So unlike preferred stocks, they don’t offer a stable return. 

Nonetheless, dividend stocks are generally safer than other common stocks. The companies that offer them tend to be older and more stable, so their stock value doesn’t fluctuate as much over time. They may not grow as much over the long term, but to make up for it, they provide income from the dividends.

Dividends from stocks aren’t guaranteed, and the stocks themselves can lose value. That makes them riskier than bonds or bank investments. But they’re a good bet if you’re willing to accept a little more risk for a better rate of return.


12. Real Estate Investment Trusts (REITs)

Best for long-term or income investment in real estate

  • Average Return: Around 4% (dividends only, not counting growth)
  • Risk: Low to medium

One specific type of dividend stock is a real estate investment trust, or REIT. REITs are companies that own and manage real estate. You can buy shares in them just like any other company on the stock market. 

An REIT offers a good way to invest in real estate without the hassles of managing properties yourself. And because the company owns many properties, they offer diversification, reducing your risk. 

Dividends from REITs are not guaranteed. However, they’re fairly stable and can be better than yields from other dividend stocks. And the funds themselves have pretty good potential for growth. 


Final Word

When deciding where to stash your cash, you aren’t limited to just one choice. For instance, you can choose a high-yield savings account for personal expenses, put your emergency fund into Treasuries, and choose a slightly riskier bond fund for your vacation fund.

One more option you shouldn’t overlook is to pay down your debts, if you have any. If you currently owe $6,000 on a credit card that charges 15% interest, paying off that debt gives you a guaranteed 15% return. That’s much better than any other low-risk investment.

Remember, all the investment choices covered here are meant for your short-term needs, such as personal savings, emergency funds, or a new-car account. Safe investments aren’t the best way to grow your money over the long term. 

For longer-term needs like retirement savings, it’s worth putting most of your money into riskier investments like stocks. It doesn’t matter so much if they fall in the short term, and their higher returns give you the best chance of meeting your long-term goals.

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Amy Livingston is a freelance writer who can actually answer yes to the question, "And from that you make a living?" She has written about personal finance and shopping strategies for a variety of publications, including ConsumerSearch.com, ShopSmart.com, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.

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