Investing is essential for to enjoy a comfortable future

What is a Safe Investment?

Investing can provide you with another source of income, help fund your retirement or get you out of a financial jam in the future. Investing helps you grow your wealth allowing your financial goals to be met and increasing your purchasing power over time. Or maybe you’ve recently sold your home or come into some money, then it’s a wise decision to let that money work for you and grow over time. In this article,you can learn about safe investments with high returns. Topics include low risk investments, high yield investments, and where to invest money to get good returns.There are many ways to invest, from very safe choices such as CDs and money market accounts to medium-risk options such as corporate bonds, and even higher-risk picks such as growth stocks, S&P 500 index funds and REITs. You can find investments that offer a variety of returns and fit your risk profile. It also means that you can combine investments to create a well-rounded and diverse – that is, safer – portfolio.Risk tolerance and time play a big role in deciding how to allocate your investments.Conservative investors or those nearing retirement may be more comfortable allocating a larger percentage of their portfolios to less-risky investments. These are also great for people saving for both short- and intermediate-term goals.If you’re looking to grow your wealth, you can opt for lower-risk investments that pay a modest return or you can take on more risk and aim for a higher return.Below are a range of investments with varying levels of risk and potential return.Industry-specific index fundHigh-yield savings accountMoney market accountsS&P 500 index fundShort-term corporate bond fundsCertificates of depositGrowth stocksTreasury securitiesMunicipal bond fundsGovernment bond fundsDividend-paying stocksGrowth stock fundsRental housingNasdaq 100 index fundAn investment can be termed as a safe investment when it gives you good returns with relatively little or no risk at all. Though there are lots of investment options, but every investment cannot be regarded as a safe investment. There are certain characteristics by which you can make out that a particular investment is a safe investment or not.1. A safe investment usually has a diversified portfolio. You make investments in various market segments so that if one sector falls you can cover up by making gains in other segments.2. Safe investment bears low risk. Meaning, the rate of return though are low and usually assured.3. Safe investments are determined by the time span for which you make investments. For example, stock market investments for short-term are generally not considered being safe, but if you take a time span of say10 years, they tend to become safe investment option for you.Apart from the above factors, a safe investment keeps your principal intact. Chances of losing your principal money that you have invested are negligible in a safe investment.A safe investment options include certificates of deposit (CDs), money market accounts, municipal bonds and Treasury Inflation-Protected Securities (TIPS). That’s because investments like CDs and bank accounts are backed by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. If the bank isn’t able to pay you back, you’ll get your money back from the FDIC. I’ll break down each of these safe investment options in the sections below.If you’re looking for a risk-free way to earn some interest on your money, a high yield savings account might be your answer. With these accounts, you’ll earn a nominal amount of interest just for keeping your money on deposit.Other than opening your account and depositing your money, this strategy requires almost no effort on your part, either. The best high yield savings accounts offer competitive interest rates without charging any fees.When choosing an account, you’ll also want to look for a bank with a good reputation for providing quality customer service, easy access and online account management, and easy deposits.Government bond funds are essentially mutual funds that invest in debt securities. These funds are sponsored by the U.S. government as a way to pay off debt and fund other projects.Best For: low-risk investors; beginning investors; and individuals seeking cash flow.While debt securities are a low-risk investment because they’re backed by the government, the fund itself is not. As such, it’s impacted by inflation and fluctuating interest rates.A money market fund is a mutual fund created for people who don’t want to lose any of the principal of their investment. The fund also tries to pay out a little bit of interest as well to make parking your cash with the fund worthwhile. The fund’s goal is to maintain a Net Asset Value (NAV) of $1 per share.These funds aren’t foolproof, but they do come with a strong pedigree in protecting the underlying value of your cash.It is possible for the NAV to drop below $1, but it is rare. You can park cash in a money market fund using a great broker like TD Ameritrade, Ally Invest, and E*TRADE or with the same banks that offer high interest savings accounts.While you may not earn a lot of interest on your investment, you won’t have to worry about losing vast amounts of your principal or the day-to-day fluctuations in the market.This Investment are issued by state and local governments and invest in several different municipal bonds or munis. Generally, any earned interest is not taxed federally and may even be exempt from state and local taxes.Best For: Investors just starting out looking for a way to diversify without having to research individual bonds. These funds are also great for cash flow investors.The risk associated with municipal bonds is in the event of default. When the bond issuer defaults or is unable to make income or principle payments, you may lose a portion or all of your investment. While cities and states rarely go bankrupt, it can happen. However, it’s an extremely safe investment with fairly high returns. Owning several bonds within a municipal fund is a great way to spread potential risk and diversify. Investors also have the flexibility to sell or buy shares every business day, making municipal bonds another highly liquid investment.The easiest ways to squeeze more return out of your stock investments is simply to target stocks or mutual funds that have nice dividend payouts.If two stocks perform exactly the same over a given period of time, but one has no dividend and the other pays out 3% per year in dividends, then the latter stock would be a better choice.Of course, picking individual stocks isn’t easy (use some of the trading tools at TD Ameritrade or E*TRADE to help you target dividend stocks) and comes with the risk that the company may falter and take your investment down with it.A safer bet would be to invest money into a dividend stock mutual fund.With this type of mutual fund, the fund company targets stocks that pay nice dividends and does all of the work for you. You also get diversification so that one or two stocks can’t tank your entire investment.Maybe, you won’t find an investment more boring than a Certificate of Deposit. If you’re in the market for one of these low-risk investment vehicles, you can get one through your bank, credit union, or even through your investment broker.With a Certificate of Deposit or CD, you deposit your money for a specific length of time in exchange for a guaranteed return no matter what happens to the interest rates during that time period.As long as you get a certificate of deposit with an FDIC insured financial institution, you are guaranteed to get your principal back as long as your total deposits at that specific financial institution are less than $250,000. The government is guaranteeing you cannot have a loss, and the financial institution will give you some interest on top of that.How much interest you earn is dependent on the length of the CD term and the current interest rates when you purchase your CD.CD rates are generally fairly low, but you can usually get more interest if you get a certificate of deposit for a period of at least 1-2 years.In my experience, CIT Bank has a great reputation for offering some of the most competitive CD rates.If you like the idea of investing in real estate but shudder at the thought of being a landlord or flipping houses, a REIT is your ideal investment.Real estate investment trusts function a lot like mutual funds. They give investors the opportunity to buy shares in real estate ventures, earning income on the projects, which can range from offices to healthcare facilities to retail space to residential properties and everything in between.As the real estate properties make money, so do the shareholders, in the form of dividends. There are several ways to invest in REITS, with Fundrise being the easiest and one of the most profitable.Fundrise operates like Lending Club, except all of the investments are geared towards real estate. They keep risks low and interest high by carefully vetting the projects they invest in. You can get started investing in Fundrise’s Starter Portfolio with as little as $500, making it an appealing option for beginning investors.P2P Lending is one of our highly recommended short term investments. Instead of buying shares in a company (and its future profits) you are lending your money to someone else with the hope they will pay you back.If you screen your loans poorly, peer to peer lending can be extremely risky. However, screening properly and choosing only the best-rated loans is a great way to secure a decent return with little risk.Lending Club, in particular, has done a great job in setting up their collection practices in order to protect investors. (Lend Academy did a great interview with LC’s Head of Collections.)Debt issued by the Treasury is backed by the full faith and credit of the U.S. government, making it similarly as free from risk as FDIC-insured bank accounts.Best for: Money you know you won’t need prior to the maturity date of the bond; funds in excess of the $250,000 insured by the FDIC; investors willing to give up some flexibility in search of slightly better returnsOnce you exit the realm of the FDIC-insured, basically sure-bet investments, you are stepping into a different world. However, as great as a 2% return on your savings account is, you will probably need at least some investments that are taking a bit more risk if you want to build a strong portfolio. The next tier up from banking products in terms of higher risk and higher returns are bonds, which are essentially structured loans made to a large organization.The important caveat here involves the liquidity of treasuries. Unlike a CD, you can’t pull out your money before the maturity date, not even for a penalty. That doesn’t mean you’re stuck — you can easily go out and sell the bond on the secondary market. But at that point, you’ve gone from buying and holding treasuries to maturity (incredibly safe) to trading bonds (vastly less safe). While your coupon payments are completely predictable and secure, the face value of your bonds will rise and fall over time based on the prevailing interest rates, stock market performance and any number of other factors. Granted, that could work out in your favor, but only because you’ve taken on additional risk. So, if you aren’t reasonably certain you can hold the bond to maturity, they’re definitely a riskier investment.Fortunately for the risk-averse investor, there’s an option for a bond that just like your FDIC-insured bank accounts, is guaranteed by the full faith and credit of the U.S. government: These are the bonds issued for government debt, known as T-bills, T-notes or T-bonds, depending on how long they take to mature. On your end, treasuries will act just like a CD in many ways. You invest with a set interest rate and a date of maturity anywhere from one month to 30 years from when you buy the bond. You’ll get regular “coupon” payments for the interest while you hold it and then your principle is returned when the bond matures.The US Treasury has several types of bond investments for you to choose from.One of the lowest risk is called Treasury Inflation Protection Securities, or TIPS. These bonds come with two methods of growth. The first is a fixed interest rate that doesn’t change for the length of the bond. The second is built-in inflation protection that is guaranteed by the government.Whatever rate inflation grows during the time you hold the TIPS, your investment’s value will rise with that inflation rate.For example, you might invest in TIPS today that only comes with a 0.35% interest rate. That’s less than a certificate of deposit’s rates and even basic online savings accounts.That isn’t very enticing until you realize that, if inflation grows a 2% per year for the length of the bond, then your investment value will grow with that inflation and give you a much higher return on your investment.TIPS can be purchased individually or you can invest in a mutual fund that, in turn, invests in a basket of TIPS. The latter option makes managing your investments easier while the former gives you the ability to pick and choose with specific TIPS you want.Corporate bonds are not backed by the government. Instead, a corporate bond is a debt security between a corporation and investors, backed by the corporation’s ability to repay the funds with future profits or using its assets as collateral.Since you are taking on risk by investing in a company, the returns on corporate bonds are higher than other types of bonds, no matter how creditable the company’s reputation is. While that’s reassuring enough for some investors, if you’re looking for truly low-risk corporate investing, you should consider bond funds.Bond funds come in the form of ETFs or mutual funds and help to diversify your investment across a number of bonds.Most investors want to make investments in such a way that they get sky-high returns as fast as possible without the risk of losing the principal money they have invested. This is the reason why many investors are always on the lookout for top investment plans where they can double their money in few months or years with little or no risk.