Low-Risk Investments with High Returns

I think it’s everyone’s goal to take the least amount of risk and get the highest possible return. Well you can’t always have your cake and eat it too. So there’s a variety though of different types of accounts that could be utilized in today’s current interest rate environment. Where you can get a pretty reasonable return with maybe a lower risk exposure. So let’s walk through some of those options. The first starting with bonds. So you start with maybe the government types of bonds: treasuries, municipal, etc. And then there’s maybe the corporate bonds, where corporations are using those funds to finance different operations or expansions. So there’s a pre-determined maturity date. There’s a specified interest rate and then the interest is going to be paid out to you in different intervals, say semi-annually. So that’s in the bond world. You shift over to banks, credit unions and CDs. So there similar concepts. You’re going to have a pre-determined maturity date. So you know that’s the commitment that you’re making and you know what interest rate you’re going to receive. And then there’s different levels of protection with the banks as far as FDIC insurance or NCUA through the credit unions that you want to be aware of. Another liquid option would be high yield savings. If you are looking out there and trying to find , well I don’t want to tie my money up for a period of time, enter in with a higher interest rates and short-term interest rates where they stand right now. You can get a reasonable rate of return by just tucking that money aside into again, sort of a higher yield savings account. They might limit the amount of money movement. So you may be limited as an example, let’s say, three times a month can you pull money out of that account. So there’s different details there again, that you’d want to be aware of. If you shift over to the insurance world, that’s where there’s different fixed annuities or they may be called multi-year guaranteed annuities where again, they’re going to set some type of maturity date and interest and those vary in ranges from typically about two years out to maybe as far as 10 years. And so with those, you may see as you look into them, they might offer a little bit higher interest rate possibly in comparison to what the banks are offering. There’s also within the insurance world, fixed indexed annuities where your principal is protected, but then your returns you don’t know what you’re going to receive each year. It’s going to be tied to some index in the market, say the S&P 500 where let’s say they put a cap or a maximum of 10% a year. So if the S&P goes up 15%, well you’ll make 10% for that year. And then they would lock you in that interest. So there’s a lot of different accounts like that out there. So you want to be cautious and talk to a professional about how to go about potentially finding out more information about that. Getting into maybe a little bit heavier risk gets into dividends stocks. So yes, dividend stocks will generate an income stream. You might be able to get a fairly attractive yield and you want to find those different companies that have a long track record of paying their investors a reasonable amount of interest for being invested. But with that comes the risk of being invested in a stock. And so you can see those stocks drop in value. In a bad year, you could experience a 30% loss or greater. So you want to be cautious about that. But on the other side, you also have the potential for capital appreciation. Lastly, looking at an idea here, again that involves risk, but more of a balanced portfolio. So when you consider the term “balanced portfolio” it normally means about approximately 60% in equities, 40% in bonds. So you’re diversified amongst a variety of different indices, both on the stock side as well as in the bond world. And that’s what a lot of times people look at from a diversification standpoint. Again, that comes with it’s own level of risk that you want to make sure, especially in your retirement years that you’re going to be comfortable with what that looks like and what a bad year can do to your overall investments. A lot of times investors are simply trying to pick one or the other out of those different types of accounts. We think it’s valuable to look at a diversified plan where you’re considering all of your different account options. Some Advisors may not have the different licensing to be able talk about all of those accounts. So that’s where we encourage you to give us a call here at Centennial Wealth Advisory. We’d love the opportunity to sit down with you and help you plan to retire well.