After recently watching the stock market plummet, it is understandable to be wary of investing. However, choosing to invest your money now can lead to long-term financial well being. It may even allow you to retire years ahead of the norm. 

Plus, investing your money does not have to take nerves of steel. If you choose low-risk investments, then you can grow your money slowly!

Low-risk investment Best for
Acorns New investors
E*TRADE Seasoned investors
You Invest by J.P. Morgan Those needing expert advice
Betterment Low-risk mutual funds
Wealthfront Automated investing
CIT Savings Builder High-yield savings accounts
Worthy Bonds Low initial investment
CIT Bank Predictable growth
Lending Club Value alignment

Of course, everyone wants a high return on their investment. However, you should realize that lower risk typically equates to lower returns.

With that said, there are still options for a relatively high return on low-risk investments. 

Acorns

If you are completely new to investing, then Acorns is a great place to start. This app can turn anyone into an investor with a micro-level approach. You’ll just need to download the app and outline your investing goals and your risk tolerance. 

You can start investing with as little as $5 into ETFs. Acorns takes care of any rebalancing to keep your investment mix aligned with your risk tolerance. 

E*TRADE

E*Trade offers a variety of investment services. Among these, it offers low-risk ETF investing options. 

Although the minimum account balance is high at $500, you’ll have the opportunity to manage your portfolio to suit your risk tolerance. You will need to be a hands-on investor to make this platform work for you. However, there is 24/7 customer service ready to assist you when you run into problems. 

If you are confident in your ability to manage a portfolio to suit your low-risk tolerance, then E*Trade is a good option for you. 

You Invest by J.P. Morgan

You Invest by J.P. Morgan combines the convenience of online investing with the expertise of J.P. Morgan’s financial advisors. You have two major options within the You Invest app: You Invest Trade and You Invest Portfolios.

You can enjoy commission-free trades and $0 opening balance requirements by managing your portfolio on your own with You Invest Trade. You’ll have access to the platform’s tools that help you research and make decisions based on the performance of thousands of investments.

If you’d prefer to rely on the expertise of J.P. Morgan’s brokers through You Invest Portfolios, you’ll need a $500 opening balance. You’ll also pay a 0.35% advisory fee with this option.

Low-risk mutual funds

Mutual funds are not necessarily low-risk, but some can be. The risk level of a mutual fund will vary greatly based on the holdings of the fund. 

Before you choose to invest in any mutual fund, make sure to assess it for risk factors before moving forward. Ensure that you are comfortable with the mutual funds that you choose. 

Here are a few places where you can find mutual funds to invest in. 

Betterment

Betterment provides a comprehensive platform to start investing. In addition to risky investments, it also offers lower-risk investments. 

If you prefer to invest without too much forethought into the differences between mutuals funds then Betterment is a good option. The robo-advisor has many options available and it will tailor your portfolio to your specific risk profile. If you want a low risk investment, then Betterment will find that for you. 

Overall, Betterment offers a great way to invest without spending too much time. 

Wealthfront

Wealthfront offers low-cost automated investing with access to lower risk mutual funds.

As with Betterment, this company offers an easy way to start investing. You’ll go through the quick sign-up process, and after you’ve answered all their questions, Wealthfront will base your portfolio on your risk tolerance and goals. 

You can choose to stick to mutual funds with lower risk through this platform. 

As a wise man once said, a penny saved is a penny earned. If you keep your savings in a high yield savings account, then you have the opportunity to watch your pennies grow with no risk.

The beauty of high yield savings accounts is that you will always have access to your money. Unlike many other investments, you can pull out your money at any time. Many companies offer competitive interest rates with low fees to make high yield savings accounts worth your while. 

Even if you only put your emergency fund into this account, it is better than letting that money lose value through inflation in a regular savings account. 

CIT Savings Builder

The CIT Savings Builder is a high yield savings account with a good reputation.

With this account, you’ll need to have a $25,000 account balance or deposit a minimum of $100 each month to earn the highest APY. That makes the CIT Savings Builder perfect for those who are just starting to save and need the extra push to get going. 

CIT bank is well-known for its high-quality customer service and easy online account management.

Low-risk savings bonds

Buying a low-risk bond directly from the U.S. government can be a great way to earn interest quickly. But this type of investment has traditionally come with a higher level of risk than other investment types.

Savings bonds can be very rewarding for a first-time investor. The key, though, is to keep your risk as low as possible without sacrificing the reward it will bring. There are tools that can help you strike that balance.

Worthy Bonds

With Worthy Bonds, you can purchase $10 bonds that offer an impressive 5% interest rate, helping you keep that risk-reward balance in check. Worthy makes this business model work by issuing loans to businesses that later repay those loans with interest, increasing your own earnings as an investor.

Worthy is careful with the loans it issues, which keeps your risk as an investor to a minimum. To qualify for a Worthy investment, a business loan must be secured by assets that appraise for higher than the loan being issued.

On your end, you choose how and when your money is invested, keeping you in control at all times. If you’re still learning, Worthy allows you to choose auto-investments, making the decisions for you based on how its own purchases are going from one day to the next.

As you prepare for retirement, you may seek out more stable investment options. The goal of retirement investing is to ensure that you do not experience any surprise dips in your income down the line. When you choose your investment vehicles wisely, this is less of a concern. 

Certificates of deposit (CDs)

If you want a steady cash flow in retirement without any worries about the market, then a CD is a good choice. You can set up a CD ladder to glide right through retirement. CD’s are traditionally considered very low-risk investments and that holds true. The biggest downside of a CD is that you cannot access your money during the allotted timeframe without paying a fee. 

Make sure that you will not need to break open a CD before you decide to invest. 

CIT  Bank Certificate of Deposits

CIT Bank has competitive rates on CDs, with terms starting at six months. You can earn as much as 1.85% on an 18-month CD, with no account opening or maintenance fees. You’ll need only a $1,000 opening deposit. Use the CD calculator to determine how much interest you can earn.

If you still aren’t sure about tying your funds up, consider their no-penalty CD. There’s no penalty for pulling funds out, as long as you leave them untouched for the first seven days after depositing them.

Find some of the other best CD rates here.

Dividend-paying stocks

Creating an income stream in retirement can be invaluable. Stocks that pay dividends are capable of providing an income stream as you cease working full-time. However, dividend investing is very hands-on. You’ll need to trust your investment abilities and keep a close eye on companies if you choose this route. 

Dividend stock investing is not necessarily low-risk, but it can be if you study the market carefully. 

Peer-to-peer lending

Peer-to-peer lending is a short term investment opportunity. You’ll loan money to someone with the hope that they will pay you back. Of course, there is always the chance that they will not pay you back. The key to low-risk peer to peer lending is a careful screening of your borrowers.

One place to find creditworthy borrowers is LendingClub. Overall, they have an average default rate of around 5%. With a default rate that low, it can be a relatively safe investment. 

LendingClub is constantly updating their investing offers, in fact, they do so every seven days. If you choose to invest in a loan, you can invest in increments of of $25, so you never have to fund a loan yourself.

Investment Risk level Unique features
Acorns Variable based on your preferences Extremely low minimum investment to get started.
E*TRADE Variable based on your preferences Low-cost trading options
You Invest by J.P. Morgan Variable based on your preferences Choice between expert guidance or self-service
Betterment Variable based on your preferences Access to low-risk mutual funds and many other products.
Wealthfront Variable based on your preferences Foundation in technical knowledge is the base of this company.
CIT Savings Bank Very low risk Easy access to the money while enjoying some growth
Worthy Bonds Low risk Earn long term fixed rate
CIT Bank CD Low risk Competitive rates with no account opening or maintenance fees

How I came up with this list

Not all investments are created equally. With that in mind, I combed through several factors to determine which investments were truly the best low-risk investment options. I took into account average returns, the accepted risk tolerance of the investment and more. 

Although I found many relatively low-risk investments, it is important to note that all investments come with some form of risk. Take that into consideration before you pull the trigger on a particular investment. 

A low-risk investment is simply an investment that has a high chance of producing a return. The return produced will likely not be the highest return on the market. In fact, it is likely that your return on investment will be on the lower end. However, it is a safer investment than some of the high-risk investments available. 

With higher risk comes the higher potential rewards. However, you’ll need to be prepared to suffer larger losses if you choose a high-risk investment. 

Although the return will likely be less attractive than a high-risk endeavor, a low-risk investment is a great option. You have the opportunity to grow your wealth over time without putting it all on the line.

The volatility of the stock market leads to some incredible annual gains as well as crushing losses. However, the historical average growth of the stock market is around 8%. With returns like that, you can truly see your money grow quickly. 

In contrast, low-risk investments have a much lower potential return. The lower return is the price paid for a safer investment. Within low-risk investments, there are big swings among potential returns. 

For example, with high yield savings accounts, you can expect to see returns around 1.5% or 2.0%. The exact rate will vary by the bank and the market at the time. Other low-risk investments such as CDs may offer returns close to 2.25% or 2.5%. 

On the other hand, bonds can offer a significantly higher return. Although it fluctuates with the market, you can expect better returns with a bond than a savings account. 

Overall, you should not expect to get rich quick through low-risk investing. In this case, you would be playing the long game of building wealth over time. If you start while you are young, then it is possible to leverage low-risk investments into a healthy financial portfolio. At the very least, you will hedge your savings against the powerful bite of inflation. 

If you cannot stand the thought of losing any money at all in the market, then low-risk investments are a better option. Of course, there is money to be made over time by leaving a large amount of money in the market. But you’ll need to be able to stay the course emotionally as stocks rise and fall. 

The stock market is notorious for its volatility. This seems to be especially true in recent months. If you know that you could succumb to the emotional pressure to sell as the stock market plummets, then you should stick to low-risk investments. If you can steel yourself to hold on to your hat as the stock market takes your life’s savings on an emotional rollercoaster, then the stock market is a viable option. 

It all comes down to how well you know yourself. It is not a bad idea to start with low-risk investments to see how it goes. You can always add high-risk investments to your portfolio later. 

Summary

In the end, low-risk investments are a good option for everyone. Even if these investments only make up a portion of your portfolio, they can help you weather the storms of the stock market. Every portfolio should be made up of an asset allocation that you can stomach throughout the course of your investing career. 

Take the time to explore your options before moving forward with an investment choice. The most important thing is to stay the course. Make sure you are able to do that before making an investment of any kind. 

Read more:

  • 6 Easy Ways To Start Investing With Little Money
  • 5 Smart Ways To Invest $100,000 And Minimize Risk