Where to Find Low Risk, High Return Investments

The volatility of the stock market has left some people wondering about where and how to invest their funds.

Many people would like to invest, but are dissatisfied with the offered return. Others are concerned about the safety of their investments.

It can be a balancing act that requires knowledge, skill, and finesse. High rates of return usually come with a large risk. Safer investments tend to offer little - or no return, once fees have been deducted.

While it is true that no investment is without risk, there are ways to invest and get a good return.

Where to Find Low Risk, High Return Investments

There are several investment options that are low risk. In turn, they offer low returns. As the risk rises, typically so does the return.

Here is a list of investment models from relatively low to higher risk.

1. Certificates of Deposit (CDs)

Certificates of Deposit (CDs) are savings certificates with a fixed maturity date, specified fixed interest rate and can be issued in any denomination aside from minimum investment requirements. They are available through your bank, your credit union or even your investment broker.

CDs are generally issued by commercial banks and are insured by the FDIC up to $250,000 per individual. The investor is guaranteed to get the principal back as long as the total deposits with that lender are less than $250,000. The government guarantees that you cannot have a loss, and the financial institution gives you interest.

In return, the investor gets a set interest rate for that period regardless as to whether rates go up or down during the specified period. The funds are locked in until maturity of the specified term length. It is possible to withdraw the CD early for a penalty that is usually equal to three months’ worth of interest.

Interest earned is dependent on the length of the CD term and interest rates in the economy. Current rates are about 2%

2. Treasury Inflation Protected Securities (TIPS)

The U.S. Treasury offers several types of bond investments. The one with the lowest risk is called a Treasury Inflation Protection Security or TIPS.

Treasury inflation protected securities (TIPS) are a treasury security that is indexed for inflation in order to protect investors from the negative effects of inflation. TIPS are considered an extremely low-risk investment because they are backed by the U.S. government and because the par value rises with inflation, as measured by the Consumer Price Index, while the interest rate remains fixed. This can be advantageous because the principle is indexed.

As an example, an investor invests in a TIPS today that only comes with a 0.35% interest rate. Compared to a CD or even basic online savings account, this doesn’t seem very enticing. However, if inflation grows a 2% per year for the length of the bond, then the investment value increases with that inflation, and gives a much higher return on investment.

Other advantages are that the Interest on TIPS is paid semiannually.

TIPS can be purchased directly from the government through the TreasuryDirect system, in $100 increments with a minimum investment of $100, and are available with 5-, 10-, and 30-year maturities.

3. Gold

Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a way of diversifying risk.

While gold is subject to speculation and volatility as are other markets, gold preserves wealth in an economic environment where investors are faced with a declining U.S. dollar and rising inflation. Historically, gold has served as a hedge against both of these scenarios. Much like the TIPS, with rising inflation, gold typically appreciates.

4. Money Market Funds

A money market fund is an open-ended mutual fund that invests in short-term debt securities such as T-bills; certificates of deposit (CDs); and corporate commercial paper. The fund usually pays out a little bit of interest with the main goal of maintaining a net asset value (NAV) of $1 per share. A downside of money market funds is they are not covered by federal deposit insurance.

5. Municipal Bonds

Municipal bonds (munis for short) are debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways or sewer systems. These bonds are exempt from federal income tax and most states and local municipalities also exempt income tax on munis for issuers in the state. Discuss this with your accountant before making any decisions.

These municipal bonds are fairly safe because the likelihood of the borrower defaulting is very low. Governments can always raise taxes or issue new debt to pay off old debt, which makes holding a municipal bond a pretty safe investment.

The average yield is tied to the tax bracket exemption. For someone in the 28% federal tax bracket, that is equivalent to a 2.5% taxable bond.

6. U.S. Savings Bonds

U.S. savings bonds are debt securities issued by the U.S. Department of the Treasury to help pay for the U.S. government's borrowing needs. U.S. savings bonds are considered one of the safest investments because they are backed by the U.S. government.

U.S. Savings Bonds come in eight specific values: $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000. While these bonds do not earn much interest, they do offer a less volatile source of income. They offer a way to save for the future, as they cannot be cashed until at least six months after purchase. The time it takes for a bond to mature varies, but it is often somewhere between 15 to 30 years.

These bonds cannot be easily transferred and are non-negotiable. In order to purchase or redeem a U.S. savings bond, you must be an American citizen.

7. Annuities

An annuity is a contractual financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. They are most commonly used to generate retirement income.

The insurance company takes a lump sum of funds from you and in return they give you a stated rate of guaranteed return. Sometimes that return is fixed (with a fixed annuity), sometimes that return is variable (with a variable annuity) and sometimes your return is dictated in part by the stock market performance with a guaranteed basic level that gives you downside protection (with an equity indexed annuity).

8. Cash Value Life Insurance

Cash-value life insurance is a type of life insurance policy that pays out upon the policyholder's death, and also accumulates value during the policyholder's lifetime. The policyholder can use the cash value as a tax-sheltered investment, as a fund from which to borrow and as a means to pay policy premiums later in life. It is also a clever way to pass some value onto heirs without either side getting hit with income tax.

9. Dividend Mutual Funds

Dividend mutual funds are stock mutual funds that primarily invest in companies that pay dividends, which are profits that companies share with stock shareholders. Dividends can be received as a source of income or they can be used to buy more shares of the mutual fund.

Return rates are often less predictable.

10. Preferred Stock

A preferred stock is a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock.

Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's assets and earnings. Second, the dividends of preferred stocks are different from and generally greater than those of common stock. Preferred shares generally have a dividend that must be paid out before dividends to common shareholders, and the shares usually do not carry voting rights.

This is a type of stock has both an equity (stock) portion and a debt portion (bond). Preferred stock is not traded nearly as heavily as common stock, but do have less risk than the common stock. In the credit hierarchy, governing which investors get paid first during a bankruptcy, preferred stock sits between bond payments, which come first, and common stock dividends, which come last.

Return rates are often less predictable.

11. Peer to Peer Lending

Peer to Peer Lending (P2P) is a completely different type of investment. P2P is a method of debt financing that enables individuals to borrow and lend money to other individuals, entrepreneurs or businesses.

P2P lending removes the traditional financial institution from the process. It is often direct lending without an intermediary. This can involve more time, effort and risk to the investor. 

The method is not without its disadvantages as the lender has very little assurance that the borrower, who traditional financial intermediaries may have rejected due to a high likelihood of defaults, will repay their loan. 

Often the borrower has little collateral to offer apart from some equipment necessary to start a business, as in a restaurant's kitchen.

In some circles, such as Real Estate Investing it can also be referred to as Private Money. In this type of investing, the investor lends money for the purchase and/or improvement of real estate or land. The loan is secured by real property, usually in the name of the investor, until the loan and interest are fully paid. 

Typically, the investor funding a real estate project with private money can earn between 5% to 15% return on a safe and secure investment.



With the rising inflation, it is imperative that every opportunity is used to generate the highest yielding return on investment. These investment models outline the risks and benefits of the different investing options.

What is important is to begin investing at the level where the risks and returns are acceptable to the individual as soon as possible. It is the best path to financial freedom!

Knowledge is power and updated knowledge is the most powerful of all.


It takes discipline, but living within one’s means is key to accumulating wealth. Being financially responsible in the present is a good way to ensure a comfortable future.


These steps are good places to start a more conscious and directed route to achieving your financial freedom. Read, reflect and take what will work for you.

Bottom line is that there is no blanket strategy. Each person must evaluate their own circumstances, needs, and desires. Get the help you need to achieve financial freedom.

If you don't design your own life plan, chances are you'll fall into someone else's plan. And guess what they have planned for you? Not much.

-Jim Rohn

Above all, believe in yourself and believe that you will achieve your goal!
_________________________________________
Sources:

Lynda at Sonoran Sun | Private Equity Investments 

Investopedia

Smart, Sexy People Love Themselves First!

It’s February! The perfect time to talk about a taboo subject…

Who Do You Love The Most?

I was listening to the radio the other morning and the hosts were discussing something I found very interesting. They wanted to prove a point. They asked their listeners to write down on a list the names of the people they love the most.

After a short break, they came back on air and asked their audience to look at that list and notice who was number one, two, three and so forth.

The "aha moment" was that most people do not even put themselves on the list!

So, how is this a taboo subject?

Loving Yourself FIRST.

Before you get all embarrassed and self-conscious, stop thinking about… that!

What I plan to discuss today is even more secretive than... that!

Think about it: Have you ever discussed a romantic relationship with your friends? Or have they discussed one with you? I am willing to wager that most people have had a relationship discussion – on some level – at some point in their lives.

But, how many of you have discussed your personal finances with someone other than your spouse or accountant?

THAT is the big secret!

Aha! You are starting to see where I am going with this!

Smart, Sexy People Love Themselves First!

We are taught at an early age that finances and financial information are best kept private. “That isn’t anyone’s business!”

That may work well when everything is going well, but when someone finds themselves in less than ideal financial shape, personal finance can be daunting. It is often difficult to reach out for help. It is just too embarrassing.

Why?

Kids are taught language, history, sciences, PE, and a variety of other subjects in school. Very few curricula offer a financial education of any sort before college. When I was in school, we spent a total of one period learning how to balance a checkbook in Home Economics class. That was it! In a little under an hour, we were taught everything we needed to know about money for running a home.

Nothing about financial planning, budgeting, debt or any other any other practical knowledge. Forget investing and retirement planning!

Indeed the educational system continues to let us down when it comes to learning about money and finances.

So what is a better option?

The family?

This option may not be any better. Finances are often secretive discussions only a few family members are privy to. Often within families, financial struggles remain "behind closed doors."

Children are often kept in the dark regarding any financial struggles. It is often believed that sparing children from a basic understanding of money preserves childhood innocence. While this may seem kind, it only perpetuates the lack of knowledge. When older children have an understanding of income and spending, they will be better prepared for their own lives.

The withholding of basic financial information may have other consequences. When funds are low, children may be denied the status symbols which are a right of passage for many young people today. This may also be seen as a lack of love when no explanation is given why the latest phone or expensive sneakers can't be had.

Many people carry on as though there isn't any financial difficulty at all. Appearances must be kept up. All too frequently credit is used to maintain the illusion of a comfortable lifestyle. The buy it now and pay for it later philosophy is the financial plan of many households.

In the end, most families manage the best that they can and follow the idea of being secretive about money. Stay quiet about any trouble and be giving and charitable.

Do for others.

That is a great philosophy.

However, when we are trained at an early age not to discuss personal finances, it becomes difficult to have an open discussion and seek help when needed.

What has love got to do with it?

(Oh, yes! Channel your best Tina Turner right here!)

To some people, the idea of taking care of themselves – self-love – is a difficult concept to grasp. I’m not talking about treating yourself to that great outfit or new TV. Or spending that quality mirror time. You probably won’t even remember – or care about those things next year.

What I am talking about for this Valentine’s Day is some basic financial information to take care of yourself, FIRST.

So, feel free to discuss this with your friends in the locker room, or at that next social gathering ;)

I guarantee you that they will not be expecting a conversation on how to build wealth, stay out of debt, and earn returns on your investments!

So, let’s get started!

Even if you adopt one or two of these concepts, you will not only be ahead of the game, but it could make a huge difference sooner than you think. Check them out and learn more about the subjects that can improve your life the soonest.

Love your self so you have the power to take care of your loved ones!

8 Ways To Love Yourself

1 Love Yourself With Insurance

It seems unimportant – until you need it! Think seriously: if you lost something valuable, could you afford to replace it right away? Insurance should be your No. 1 financial priority because it will protect you from accidents, the material loss of your house or car and unforeseen illness. In the event of a tragedy, it may help keep you from going bankrupt to cover these expenses.

Your Large Ticket Items

Most people know they need car or property insurance. Make sure your policies are comprehensive. Even if you have an older car you use to commute to work, don’t waive the damage or replacement of your own vehicle to save a few dollars. You may end up spending extra hours taking the bus or train to work.

If you own property, make sure you are covered for all perils. If you have made significant renovations or have benefited from market appreciation, make sure your policy is up to date. The worst possible position for a property owner would be to experience a loss and not have coverage for full replacement value.

Your Business Or Income

Whether you are an employee or entrepreneur, insuring your income is important. There are several ways to make sure you are properly covered.

Disability Insurance provides for periodic payments of benefits when a disabled insured is unable to work. This insurance replaces anywhere from 45 to 65% of gross income on a tax-free basis should illness keep the insured from earning an income in their occupation.

Business Insurance protects businesses from losses due to events that may occur during the normal course of business. There are many types of insurance for businesses including coverage for property damage, legal liability, and employee-related risks.

There is also Business Income Insurance which covers the loss of income a business suffers after a disaster. The income loss covered may be due to disaster-related closing of the business facility or closure during the rebuilding process after a disaster.

Your Self

Not only are Americans required to have health insurance, or face penalties – it just makes sense. Having coverage for medical bills protects you – and your family from financial ruin if you experience a serious illness.

Whether this coverage is through your employer or on your own make sure you understand the cost and coverage of the plan, including your deductible, or how much you might have to pay before insurance takes over and any coverage for your family members.

2 Love Yourself By Paying Off Debt

If you have debt, once you have covered your expenses – food, rent, and health insurance and very basic recreation – using any remaining funds to pay off debt. Start with the high-interest loans and work down from there.

Think of this high interest as a negative investment. Don’t be fooled by the lower monthly amount that appears on your statement. While 1% or 2% a month may not look so distressing, you are losing 12%, to 24% (for disadvantageous cards) of potential investment earnings to interest payments every year!

Pay off the loan(s), take note of how much you were paying in interest and use that amount to start funding your savings or retirement fund. That should be easily “doable” since you have not deprived yourself of anything you already enjoyed or purchased. It was JUST interest on debt!

Find ways to pay down the debt faster. Prioritize the highest interest rate debt first and work your way down from there. Ask your creditor(s) for a lower rate – you won’t “get” if you don’t “ask!” Pay off as much of your balance as you can, as soon as you can, each month. Look for lower interest rate or zero interest balance transfer opportunities and move your high interest debt to these loans to be able to pay it off sooner.

3 Love Yourself With A Good Credit Score

This should be an easier one, yet it is still very important. Know your credit score. Your credit score is a number on a scale which gives an indication of your borrowing history. I say an indication because there may be transactions and loans that are not recorded, such as personal loans from family members or cash transactions.

Knowing your score is important because it gives lenders an impression of your borrowing ability, in terms of risk. A good score also helps you get more advantageous loan rates, such as when applying for home and car loans, and when renting an apartment, or getting insurance.

It is relatively easy to keep track of your score as everyone is legally entitled to one free credit report every year from each of the credit tracking agencies – Equifax, TransUnion, and Experian. It is a good strategy to request one of these reports every four months to space them out over the year.

Another option is to have a credit card that offers you a free report as part of your member services.

Check your credit report regularly for fraudulent charges, financial inaccuracies, and personal information – including identity theft.

To maintain a good score, pay your bills on time. In addition, keep a low debt-to-credit ratio.

4 Love Yourself By Paying Yourself First

Put money into a retirement plan or an account for investing as early as you can. It is a smart and easy way to pay yourself first. The key to growing your fund is to set up automatic transfers from the bank account where your income is deposited once or twice a month.

On that note, if your checking account does not earn interest or earns less than your savings account, do not keep a high balance in that account! Some people do this “just in case” of unforeseen expenses and justify the loss of interest by saying it’s only a percent or two. Nonsense! Keep just over the minimum threshold needed to get the benefits of waived service charges, etc. – plus the amount of your regular monthly payments. Transfer money in on a monthly basis, or as needed from an account with the most advantageous interest.

Contribute to a 401(k) plan especially if your employer offers contribution matching. That is a great way to accelerate your fund because it means the company contributes a certain amount for every dollar you contribute up to a specified percentage of your salary. No one should turn down free money!

In addition, 401(k)s allow you to contribute your pretax dollars, meaning the more you contribute now, the greater the growth will be with compound interest. you'll have more money down the road, and although you will be taxed when you withdraw the money for retirement, you will be taxed in a different income bracket. For 2017, the maximum contribution to a 401(k) is $18,000.

And if you don't work for an employer that offers a 401(k), open an individual retirement account (IRA) and contribute the most you can. The maximum contribution for 2017 is $5,500. Consider a self-directed Roth IRA. One benefit of a Roth IRA is that you can use the money to make your own investments. In addition, you won't be taxed if you wait to withdraw the money at age 59 and a half.

5 Love Yourself by Funding an Emergency Account

After you conquer any high-interest debt and contribute to your retirement funds, it's time to build up some emergency savings with at least three to six month’s worth of living expenses. Keep this money in a separate savings account so you won’t be tempted to dip into it. Better yet, put it in a money market fund where it is just as safe, still liquid - and you'll see better rates of return.

6 Love Yourself With A Home

A home is the biggest purchase most people will make in their lifetime. It comes with a lot of responsibility, and a great deal of expenses, however, it can certainly be a better option than paying down someone else’s mortgage!

To think of it another way, when you rent a property, you are paying into someone else's retirement fund!

Purchasing a property requires considerable funds. Most people are aware it requires a substantial deposit (a down payment usually 20 % of the purchase price), and a home loan, or mortgage. In addition, there are taxes, insurance costs, maintenance services (for example HVAC systems), and maintenance expenses (such as renovations or replacement of components such as the roof). A home comes with several advantages, the freedom to live in it as one chooses, there are some tax advantages and possibly advantages for first time owners. When the property is no longer needed, it can be sold and any equity it retained by the owner.

7 Love Yourself By Investing Wisely

Once you have automatic funding in place for your retirement fund and have topped off your emergency fund, it is time to consider investing in models with a higher return.

I do not encourage taking on any high-risk investments, such as the stock market unless you can afford to lose the money. We have all seen markets crash and investments tank. In addition, these types of investments often come with high fees. If you enjoy the thrill and are young enough that there is a good chance the market will bounce back before you need the money, proceed with caution knowing you run the risk of losing it all.

Bonds and money market funds are a safer choice.

My preferred vehicle is real estate. Real estate investment is simply the purchase of a future income stream from property. People always need a place to live! Some people think this type of investment is risky due to the meltdown in 2008. Just as with most investment models, real estate cycles from boom to bust. The key is investing wisely and consistently and to understand the options for an exit strategy!

8 Love Yourself With Professional Services

Again, not what you might be thinking! ;)

No Man is an island.

No one is self-sufficient; everyone relies on others. This saying comes from a sermon by the seventeenth-century English author John Donne.

Take advantage of the experts around you to benefit your life. This concept most certainly applies to finances. No person can be an expert on every subject. There are times when getting help is the wise course of action. Financial help can make all the difference to one’s bottom line.

There is an old expression that the only sure things are death and taxes.

It is always prudent to not only file taxes, but to do so on time. Some people feel professional services such as accountants, or tax preparation specialists are unnecessary. Many people struggle through tax preparation by themselves to save money. Often these tax professionals can save their client much more than they cost!

Professionals who are up to date on tax code, including allowable deductions, are a great way to maximize tax returns. They understand the best way to itemize deductions, including expenses for housing costs like mortgage interest or property taxes, charitable donations and business or educational expenses. They are up to date on eligible tax credits for dependents (usually children) and low-income earners. In addition, tax preparation fees are usually deductible in the year you pay the taxes.

The same principle applies to investments. There are times when getting a professional advisor makes sense. Whether you have them manage your portfolio or offer you direction for your own investing, tapping the knowledge of a professional can be the best way to grow your assets.

Referrals from family or colleagues are a great way to find competent professionals. Interview several and find one you are comfortable with and can meet your needs. Openly discuss your expectations, and find out the fee structure of the professional to ensure you will benefit from their service before entering into any arrangement.

By implementing strategies to manage your finances and prosper, you will enjoy peace of mind not only for yourself, but for your loved ones. 

It should now be evident that loving yourself, or taking care of your own needs is not a selfish act at all. By taking care of "Priority Number One" you give yourself the luxury of taking care of your loved ones to the best of your abilities.

Implement at least one small change in the following areas to improve your financial outlook:

• Insurance Coverage 
• Debt Management 
• Credit Score 
• Retirement Plan 
• Emergency Fund 
• Home Ownership 
• Investing Wisely 
• Professional Services

Set a goal to improve in each area by the end of the year.

The best way to take care of others is to take care of yourself first.

Love yourself FIRST and put yourself on the top of that list!

If you don't design your own life plan, chances are you'll fall into someone else's plan. And guess what they have planned for you? Not much.

-Jim Rohn

It takes discipline, but living within one’s means is key to accumulating wealth. Being financially responsible in the present is a good way to ensure a comfortable future.

These steps are good places to start a more conscious and directed route to achieving your financial freedom. Read, reflect and take what will work for you.

Bottom line is that there is no blanket strategy. Each person must evaluate their own circumstances, needs and desires. Get the help you need to achieve financial freedom. 

Above all, believe in yourself and believe that you will achieve your goal!

_________________________________________
Sources:

Lynda at Sonoran Sun | Private Equity Investments 

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Further Reading

7 Ways To Save For A Comfortable Retirement

Where to Find Low Risk, High Return Investments

5 Things Kids Need To Know About Money