If you are close to retirement or have a low risk tolerance, then you should consider moving some of your investments into a safe investment vehicle. That’s because soon enough you will need to pull from your investments to pay for monthly expenses. And you don’t want any high-risk investments ruining all your efforts over the years and destroying some or all the capital you’ve built up.
Of course, you don’t want to go overboard with safe investing either, as these usually have lower returns. That’s why we have created this short guide on the best investment vehicle for you from safest to higher risk.
Certificates of Deposit (CDs)
If you leave all your money in a savings account, you aren’t earning enough interest to keep up with inflation, which means you are losing money. That’s why CDs, which are offered by banks, are a better option here. They are insured by the Federal Deposit Insurance Corporation which means they are as safe as putting your money into a savings account.
You can keep your money in CDs from 3 months to 60 months. Withdrawing before that will cost you a penalty, so leave money in these CDs that you know you won’t need any time soon.
U.S. Government Bills, Notes, and Bonds
U.S. Government bills, notes, and bonds are also known as treasuries. The U.S. Federal government has a high credit rating. This means that short-term U.S. Treasuries are considered to be the safest investment, especially during a recession.
If you are going to retire soon and the economy isn’t that strong, consider moving some of your investments into U.S. Treasuries, as these are backed by the government.
State and local governments sell bonds as well because they can use these funds to build infrastructure and improve the local economy. These are safe and tax-free, which makes them a great investment outside of your IRA or 401(k). Always do your research on the best municipal bonds to invest in, before putting your money into them.
Bond Mutual Funds
If you don’t wish to buy bonds directly, bond mutual funds are a great option for you, because the mutual fund manager will research the best bonds to invest in, and include only those in the fund’s portfolio. The three types of bond funds that are considered to be the safest are government bond funds, municipal bond funds, and short-term corporate bond funds.
Each Person Will Need To Choose the Investment Vehicle That Suits Their Circumstance Best
Everyone is in a unique situation with regards to investments, lifestyle, and retirement, so that’s why there’s no one-size-fits-all investment vehicle or strategy. Consider your situation carefully to figure out the best investment vehicle mix for you.
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