“More risk, more reward” is a mantra used often in the world of personal and business finance – but that isn’t always true. You can, in fact, make a relatively low-risk investment and receive a big reward. That is, of course, providing that you do so wisely and make the correct investment moves to begin with. Below, we’ll highlight three low-risk, high reward investment strategies that anyone can make if they’re serious about putting their money to work for them.
Preferred Stock Purchases
Preferred stocks function like bonds in a lot of ways, while still trading like you’d expect from any stock. The dividend rate is about 2% more than CDs pay out, and they trade within a few dollars of the initial price of the stock. Additionally, preferred stocks pay out monthly or quarterly, with the possibility of capita gains treatment. They can be sold at any time without a penalty and typically only carry tax or market risk.
Preferred stockholders can expect to be paid out earlier than others who have purchased stock with the company, should the company become liquidated.
Utility Stock Purchases
Like preferred stocks, utility stocks pay out 2% to 3% more than CDs or treasury securities. These are common stocks that come with voting rights and remain relatively stable over time (though not as stable as preferred stocks). They also function like bonds in many ways and can be traded at any time without the risk of paying any type of penalty fee.
The risk tied to utility stocks is only slightly higher than preferred stocks. They can also be taxed for their dividends and capital gains.
Fixed Annuities Options
Fixed annuities are a great move for those who are serious about saving up for retirement and don’t want to be bothered by the crushing pressure of high-risk investment strategy. There are several benefits of choosing to invest in fixed annuities, including:
- Being able to store a limitless amount of funds that is tax-deferred until the time of retirement.
- Being backed by the financial strength of the life insurance companies that offer the fixed annuities.
- A rate of 0.5% to 1%. This is less than you’d receive with utility or preferred stock options, but the risk is lesser. So, many people view this as an even exchange.
Unfortunately, fixed annuities do have penalties associated with early withdrawal.