It is not hard to understand why people would be looking for the safest investment options for their retirement portfolios. The risk of losing your life savings, or at least a sizable chunk of it, can be enough to make any person sweat. That’s why so many investors are seeking out low-risk investments that offer stable rates of return and minimal volatility. But what are the safest investment options for your retirement portfolio?
Here are some of the more popular investment options, suitable for a wide-ranging audience of different personalities and lifestyles.
CDs And Savings Accounts
Saving for retirement is a very important step in ensuring your financial security. Putting funds into cash savings, such as certificates of deposit (CDs) and high-yield savings accounts, will put your money to work while giving you access to it anytime.
However, keep in mind that the rates of return for these types of investments are quite low, making them ideal for short-term savings goals. If you are looking to meet a longer-term objective (such as buying a car or paying for college), consider looking into other options with higher yields.
CDs (Certificates of Deposits) are low risk because they are insured by the FDIC (Federal Deposit Insurance Corporation). The FDIC is an organization that protects money in banks. Savings accounts are safe for this reason as well since they are deposit accounts at banks. However, both CDs and Savings Accounts offer low returns on your investment.
Invest In Gold & Other Precious Metals
When it comes to security, precious metals such as gold and silver are some of the safest investments you can make. A gold bullion storage is a safe option for people looking to avoid the uncertainties of the stock market. After all, they have been used as a form of currency for thousands of years and will not lose their intrinsic value anytime soon. While you don’t want to put all of your money into precious metals, it’s smart to have some on hand in case there is a major financial crisis.
It’s also worth mentioning that investing in gold and silver can be very profitable; especially when the dollar goes out of style. The price of gold tends to increase even more when times are tough, which is why savvy investors choose to keep at least some of their money in gold.
Fixed annuities are insurance contracts that offer the person who owns the annuity, the annuitant, a guaranteed rate of return on the money invested. While the performance is usually not as good as other options, such as stocks and mutual funds, fixed annuities do offer a degree of security that many retirees find appealing.
Fixed Annuities can be purchased through an insurance company or financial professional. When you buy one, the insurer places your money in a separate account and invests your money in conservative, low-risk securities such as bonds and money market instruments.
Once you buy a fixed annuity, the insurer is obligated to pay back the purchase price and guaranteed interest rate on the date of maturity. The only way you can lose money with an annuity is if, for some reason, the insurance company becomes insolvent and goes out of business.
Bank Fixed Deposits
Fixed deposits, also known as time deposits, are bank investments that offer a guaranteed rate of return; usually higher than CDs and Savings Accounts. Many banks offer fixed deposit accounts that mature after anywhere from one month to five years. The longer the term length, the better your returns will be.
Since these bank accounts tie up your money for the duration of the term, they are not advisable for short-term savings goals. However, a five-year fixed deposit can be an attractive option if you would like to create a higher-yield retirement portfolio without adding too much risk of losing money.
Stocks & Mutual Funds
Typically, stocks and mutual funds offer better returns than other types of investments; but they also come with more risk. If you are investing for the long-term, then this is not a problem. However, it means that you could end up losing your money if the market goes south, and you sell at the wrong time.
If you want to invest in stocks or mutual funds but don’t like taking on too much risk, consider an index fund (which invests in many different companies rather than just a few) or a mutual fund that invests in low-volatility stocks.
Retirement Income Funds
Retirement income funds are mutual funds that invest in stocks, bonds, and other securities that pay out a steady amount of money every quarter/year.
They offer a high degree of yield; usually much higher than CDs or Savings Accounts. The reason these funds are considered safe investments is that the performance tends to remain consistent over time, even when the market goes through periods of turbulence.
The gains you receive from investing in retirement income funds are taxed the same as ordinary income. For this reason, it’s not a good idea to buy one if you are looking for long-term tax advantages.
Many investors choose to buy real estate as a way of building their retirement portfolio. They can be an excellent investment, especially if you want to diversify your holdings and take advantage of the tax breaks that come with owning rental properties. What’s more is that even if the market takes a dive, there is still a good chance that the value of your property will continue to grow.
While investing in real estate is great, real estate takes a lot of work and expertise to get the most out of them. You need to know all about mortgages, tax laws, and building maintenance; not to mention how long it will take for your property’s value to go up before you can make any money off of it.
Non-traded Real Estate Investment Trusts (REITs)
Non-traded REITs are traded very similar to stocks. They provide investors with an opportunity to invest in real estate without actually buying any property outright. There are several benefits to investing in non-traded REITs, including lower risk and diversification; however, these funds tend to offer lower returns than other types of real estate investments.
Retirement portfolios should be composed of a variety of different investment options, each offering an array of benefits and risk levels. The trick is to find investments that balance safety with high returns over time.