5 Low-Risk Investments You Can Open Today Financial Coach Carreira Finance

5 Low Risk Investment Options To Open Today

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Low risk investments are a great way to start investing your money. They are one of the best investments to grow your emergency fund money. In this article, we go through the 5 low risk investment options you can start using today!

Low risk investments protect your money against partial or total loss. In other words, you won’t lose any of your principal or the interests paid.

However, the interest rates offered in those accounts can still vary over time. Low risk investments are a great way to fight inflation and reduce the stress of high risk fluctuations.

Why you should always open a FDIC insured account - Carreira Finance

What Are FDIC Insured Accounts?

Before opening any investment accounts, you need to make sure that they are FDIC insured.

Any money that you save or invest in an FDIC insured account is insured up to $250,000. So, even if your bank or financial institution would close for any reason, you will be reimbursed up to $250,000.

In other words, always open FDIC insured accounts no manner how tempting the bonus on other accounts are.

1. Traditional Savings And Interest Checking Accounts

The safest way to keep your money is to save it in a traditional savings or an interest checking account. But, the annual percentage yield (APY) you earn with those accounts is close to none. In other words, if you save your money in those accounts, you will lose money against inflation.

In 2019, the national average interest rate has been 0.09% for savings accounts and 0.06% for checking accounts. For example, if you were to put $1,000 in your savings account, you would earn $0.90 pretax in your first year on average.

Welcome Cash Bonuses

The only strategy that can be profitable with those accounts is if you get “welcome” cash bonuses for opening a new account. But, you have to follow a few rules to earn those cash bonuses.

For example, a rule could be to set up a direct deposit to your account. Another rule could be to deposit money in your account and keep it for a certain amount of time.

Make sure you understand all the rules before opening a new account. This strategy can be a great way to give your emergency cash reserve a little boost.

2. High-Yield Savings Accounts

High-yield savings accounts might be the best rewarding place to keep your money. The interest rates are higher than in any traditional checking or savings accounts. You can also withdraw your money at any time in case you need it quickly.

Low Risk – Variable Interest Rate

Investing in a high-yield savings account offer variable interest rates. Meaning that interest rates can change at any time due to economic variations. But, they still make perfect candidates to grow your money. You will never have to worry about short-term volatility.

Before opening an account, take a look at different banks and financial institutions. Your goal should be to choose the product that fits best your needs. In other words, take a look for competitive interest rates, free transfers, and no monthly fees.

3. Money Market Accounts

A money market account is a great option to keep your emergency cash reserve. It is a mix of traditional checking and savings accounts. But, the best part is that money market accounts offer higher yields than both of those accounts.

Low Risk – Variable Interest Rate

Money market accounts are one of the best low risk investment options due to their high liquid assets. They offer great benefits like insurance protection, check-writing privileges, and debit cards. But, be careful of fees that will reduce your profits.

Financial institutions offer high rates because they invest money in short term securities. For example: certificates of deposit (CD), municipal bonds, and treasury notes. That is why your money market interest rate is calculated daily.

As always, do some research before settling down on which money market account to open. Thus, make sure to compare fees and any other features.

4. Certificates of Deposit (CD)

Certificates of deposit are a great option to invest your money. But, to use this product for your emergency fund, it is recommended to leverage the “CD ladder” strategy.

Low Risk – Fixed Interest Rate

Certificates of deposit are one of the safest low risk investment options. They offer fixed interest rates from the beginning to the due date. You are guaranteed to earn the interest rate you signed up for if you don’t withdraw your money before the due date.

Let’s look at an example. You open a CD for one year at 2% APY. Then, at the end of the year, you will earn 2% on the money you invested. Even if the global economy or the stock market crash, you will still earn those 2% APY.

How To Access Your Money?

There is a catch about the traditional CD investing strategy. The capital invested won’t be accessible to withdraw whenever you want. You would have to wait until your contract term ends to get your money back.

If you would access your money before the maturity date of your CD, you will have to close it and pay a penalty fee. So, when you open a CD, make sure you don’t need the money you are about to invest until the contract matures.

What Is The CD Ladder Strategy?

Earlier, we talked about the “CD ladder” strategy. It is a great way to invest your emergency fund. By following this strategy, you won’t pay penalty fees, and you will get your money at a defined cadence.

The strategy is to divide your money evenly over multiples CDs. Each CD will have a different maturity date so you can be sure to have money accessible when needed. If you go with this strategy, make sure you write down the maturity dates of each CD to avoid any confusion.

5. Roth IRA Accounts

Roth IRA accounts are well known as retirement accounts, but you can also use it as an investment account. They are also one of the tops long term investment options.

What Are The 2020 Contributions?

In 2020, your income would have to be under $139,000 (single) or $206,000 (married filing jointly) to make contributions to a Roth IRA.

Per year, you can contribute to your Roth IRA up to $6,000 if you are under age 50, and up to $7,000 if you are age 50 or over. Keep in mind that the money you use as contributions is post-tax money, so you already paid taxes on it.

When Can You Withdraw Money?

At any time and for any reason, you can withdraw your contributions money from your Roth IRA account. Thus, make sure to track your contributions to only withdraw contributions and not earnings.

If you withdraw earnings, you might pay taxes on them and 10% as early withdrawal penalty. But, if you have less than age 59½ and you opened your Roth IRA more than 5 years ago, there are two ways to withdraw earnings without paying taxes or penalties. Either you become disabled, or you are buying your first home.

5 Low-Risk Investment Options You Can Open Today Financial Coach Carreira Finance
How You Can Beat Inflation With These Low Risk Investment Options - Carreira Finance


In conclusion, these 5 low risk investment options are the best way to grow savings. You won’t have to worry or stress about a potential money loss if you can follow the account rules. If you have the right strategy, you can even beat inflation!

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