1. What are safe investments with high returns in today’s market?
Money management, a skill that is appreciated by many, seems sometimes like an uphill task. When it comes to money management, there are always some risks involved and we often ask ourselves how can we get the best possible return on our initial investment.
Actually, if you think about it, no investment is truly safe. Therefore, before you head out and ask yourself what are the best safe investments with a high return, always have in mind one thing. No investment is truly safe, period.
What you should do is make a note of some sort of your investment goal and the risk you can afford to expose yourself to. There is a reason to this thinking, as you will have a strategic advantage.
Once we said the most basic things, there are several investment vehicles that are relatively safe investments and offers a high return. But how does an individual choose an investment vehicle? Well, lucky for you, here are some suggestions.
2. 6 types of (relatively) safe investments with high returns
2. 1. ETFs
Exchange Traded Funds or ETFs are marketable security that tracks an index, bonds, a commodity or grouped assets like an index fund. They are different from mutual funds as ETF trades like a common stock on a stock exchange.
If you would compare an ETF to a stock, ETF is a better bet because it is easier to maintain the return if the dispersion potential of the returns is comparatively narrow.
This part is very important as they simply mimic the value of the underlying company, index, bond or a commodity. Also, they never try to outperform the Index like in the case of Index Funds. That said, they mimic the performance. What that means is they don’t beat the market, but they are trying to be the market.
2. 2. Utility stocks
Utility stocks are relatively stable in price, and they pay dividends of about 2% to 3% above treasury securities. This is very nice, but utility stock has some other major characteristics.
Utility stocks are common stocks and they come with voting rights. Moreover, their share prices are generally not as stable as preferred offerings.
Also, utility stocks are often graded by rating agencies in the same manner as bonds and preferred stocks. Furthermore, they are 100% liquid and they can be sold at any time without any penalties whatsoever.
However, utility stocks, as relatively safe as they are, they usually carry a slightly higher risk than preferred stocks. Also, they are subject to taxation on both dividends and any capital gains.
2. 3. Bonds
If you want to take a relatively safe refuge in the stable environment of debt, you are in luck, as debt is one of the most common tools of investment.
Does your bond have a maturity date less than 3 years? If so, they are considered amongst the best and safest options with a more than acceptable rate of return.
Moreover, you can take a look at treasury or municipal bonds or even corporate bonds. On the other hand, be sure to take a look at the rate of default on these bonds as it is extremely important to commit money after a detailed research and down to earth analysis of potential losses. Remember, proper and detailed analysis and research is half the work.
2. 4. Preferred stocks
Preferred stocks can be defined as a hybrid security that trades like stocks, but at the same time, it acts like a bond in many other ways.
Some major characteristics of preferred stock are that preferred stocks can pay monthly or quarterly, and their dividends can qualify for capital gains in some cases. Moreover, preferred stocks have very low liquidity risk as they can be sold at any time without any penalties. Furthermore, the risks included in preferred stocks are the market risk (duhh!) and tax risk.
There are 3 types of preferred stock:
- Cumulative preferred – cumulative preferred stocks accumulate any dividends that the issuing company can’t pay due to a bad financial situation.
- Participating preferred – these type of preferred stock allow shareholders to receive larger dividends if the company is doing well.
- Convertible preferred – finally, these type of preferred stocks can be converted into a certain number of shares of common stock.
Also, if you own a preferred stock, you can count on getting your money back from the issuer before common stockholders if the company defaults. Unfortunately, preferred stocks do not have voting rights.
2. 5. Real estate
Although real estate can be called a safe investments with high returns, the rate of said return is directly proportional to your common sense, judgment, and timing which has to be close to perfect. To get an idea what is the right real estate investment for you, you should give a good thought and consult a professional real estate advisor before you part ways with your money. Also, you should consider any possible tax and liquidity of your investment. Moreover, a proper real estate can serve as an additional income in terms of renting out the property on a lease basis.
2. 6. Rare coins, collectibles, and paintings
As rare coins, collectibles and paintings can’t be considered a financial instrument they still might have a very high investing value. If your hobby just happens to be an antique coin collector, you can take on the role of relatively safe and high yielding return. Also, just because it is your hobby, it should be actually fun!
Coins, rare collectibles, and paintings, all can be bought or sold in auctions. In today’s modern world, you can buy or sell from the comfort of your home.
If you happen to be an investor who wants a safe investment with relatively high yields, there are lots of options to choose from. It is important to understand one thing, there is no truly risk-free investment, but different investment carries different risks. Every investor has his/hers own way of investing and they might be willing to risk more for a higher reward.
Do you have any favorite investment options with (relatively) safe and high returns? Comment below!