Guaranteed investment: 9 investments are guaranteed profit
High return is what every investor strives for, but it is not the only factor in this equation. When reviewing investments, professionals look not only at the possibility of absolute return, but even at what is called risk-adjusted return to ensure a guaranteed profit investment in terms of value for risk even if it means accepting lower returns. This means that you may prefer an investment that only pays 2% annually over an investment that yields 20% returns. A return of 2% may be guaranteed, while an investment with large returns may carry a risk of loss as large as 40%, making it a non-guaranteed investment.
9 ways to invest guaranteed profit
This list will provide you with a closer look at 9 investment options that offer good returns in exchange for the high levels of security they provide.
1- High-yield savings accounts
The High Yield Savings Account is the gold standard for safe investments. It is a profit-guaranteed investment that offers you high returns compared to the average national savings account rate, with a complete absence of risk. The money you store in almost any bank will be insured by the Federal Deposit Insurance Corporation, which means that you will receive compensation from the government in the event of any losses.
The rate of return offered by savings accounts varies according to changes in market conditions, as the returns may not look attractive when the prices are low. High-yield savings accounts currently pay between 0.50% and 0.61% interest rates.
One of the most important features offered by high-yield savings accounts is liquidity, so you can access returns easily and quickly if you need them. It may be an ideal choice for investors who are looking for completely risk-free investments.
2- Certificates of deposit
Certificates of deposit are insured by the Federal Insurance Corporation (FDIC), so there is no risk involved. By using this guaranteed profit investment, you automatically accept a time horizon that usually ranges from 1 month to 10 years, and you have to wait until this period expires to be able to access your funds. While the level of liquidity of Certificates of Deposit is lower compared to an emergency fund or savings, they do provide you with a higher rate of return.
Before you invest in certificates of deposit, consider the following:
Your need for the money you invested before the maturity date.
Whether the interest rate is higher than what is available in high-yield savings accounts.
3- Money market accounts
Money accounts usually offer better rates than savings accounts, in addition to offering more liquidity and flexibility.
If you only dedicate your account to depositing or writing a monthly check, this option may be ideal for you. But when it comes toreturns, it might be a good idea to compare all available investment options to get a guaranteed profit.
A money market account limits you to six transactions per month, and you may be fined or even closed if you exceed that. This investment is suitable for investors who may need their money frequently, and who are looking for some great flexibility.
4- Treasury bonds
Since the 0.50% return on a high-yield savings account is more than what you would get in your bank, you may need to build a solid portfolio by raising your risk tolerance level. Treasury bonds will present you with higher risks than other investment options in a guaranteed profit investment article, but they promise you good returns as well.
Treasury bonds are an investment option fully guaranteed by the US government and are structured loans provided to large institutions. You’ll have to invest with a fixed interest rate and maturity between one month and 30 years from the time you buy the bond, then get regular payments of interest while you hold it before you get your full principal back when the bond matures.
While your payments are completely safe, the face value of your bonds can go up and down based on prevailing interest rates, stock market performance, and other factors. This may work to your advantage if you are certain that you can hold the bond until maturity, and if you are willing to give up some flexibility in search of better returns.
5- Treasury bonds protected from inflation
Many people turn to Treasury inflation-protected securities as a guaranteed investment. The interest payments will be fairly small compared to what you would earn on a regular treasury, but that is because the value of your principal changes to match the inflation index. If the inflation rate suddenly rises by 5%, this investment will protect you from any potential losses.
Like any other bond, you expose yourself to all kinds of additional risks if you sell it before it matures, so you need to make sure you don’t need that money before maturity.
6- Municipal bonds
Municipal bonds are a good option for investors who want to get good returns and do not mind raising their risk level. There are cases in which major cities declare bankruptcy, and thus their bond holders lose a lot of money.
The federal government has a vested interest in keeping borrowing costs low for state and local governments, which has led them to exempt interest earned from taxes at the federal level. So its advantages not only stand at safety, but also reduce your tax bill compared to many other options.
7- Corporate bonds
Like governments of all sizes, corporations also issue debt by selling bonds. Although they are riskier than treasury bonds, you can avoid their potential risks and keep yourself in the safety zone by sticking to the major public companies.
You are not required to guess how financially sound the company is. That is the job of public companies that issue financial reports detailing assets, liabilities, and income to help you get a clear idea of the company’s position.
If your knowledge of the balance sheet or income statement is limited, you can rely on rating agencies such as Moody’s or S&P Global Ratings. An AAA rated bond usually presents minimal risk if you hold it to maturity.
8- S&P 500 Index Fund / ETF
Stock markets can be incredibly volatile, you can make or lose a significant portion of your investment overnight, which makes it difficult for many individuals to risk their savings for an unsecured investment.
Diversify your portfolio
Investing in index funds or exchange-traded funds can help you diversify your portfolio. You will not be affected by the consequences of a company’s exposure to a loss if you invest in a fund that includes shares of various companies, especially if those shares are part of large and stable companies.
Owning stocks for the long term
Another risk mitigation strategy is to own stocks for long periods of time. Stock markets are incredibly messy, but looking at them in terms of contracts rather than weeks or months can give you a clearer view of trends and volatility.
Why choose the S&P 500 index?
The S&P 500 is one of the most popular options for index investments, as it includes most of the blue-chip stocks, and it has a long history of returning close to 10% annually. You can also consider the Russell 1000, which is made up of 1,000 highly valued US companies which will give you twice the diversity.
Stocks are generally considered riskier than bonds, but you can mitigate much of this risk and enjoy solid returns by diversifying your investment portfolio. This is a sure investment for younger investors who have plenty of time for the long wait, and for those interested in growing their money at a faster rate than bond and banking products.
9- Distributed shares
Dividend shares offer a dividend in the form of a regular cash payment that is issued to shareholders. Here are some factors to consider when assessing dividend stock risk:
This dividend is more consistent and is paid whether the stock goes up or down. You get paid even if your stock underperforms in terms of its share value, which makes it easier to hold on to the stock and wait for a decline.
The dividend acts as a bulwark against falling stock prices. Dividends are set as a payment per share, but investors typically focus on the “dividend yield,” which is the percentage of a company’s share price that will be returned as dividends.
Companies can cut their dividends especially in times of stress, but this is rare because it sends shares down. What attracts people to dividend payments is consistency. It’s what causes them to respond badly when the dividend seems less secure. You can significantly reduce your risk by investing in companies that have a proven track record of consistently increasing profits on a regular basis, as well as a solid return.
How do safe, high-return investments compare?
The ideal portfolio is one with minimal risk and maximum returns. Despite the security and certainty provided by your savings account, its returns are not sufficient to create wealth. Likewise, while the returns offered by the S&P 500 fund are much better in the long run, it is important to view them in the context of the risk that you have to accept.
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