Low Risk Investments

Savings Bonds, T-Bills, and CDs

Jul 3, 2009

For investors with a low risk tolerance who still want their money working for them, there are many benefits with bonds, CDs, and T-Bills.

The market can be a scary place for money to be sitting around. This decade has seen a stock market crash and slump, complemented by a housing crisis.

For those who have lost the fire to risk any more of their precious nest egg, the best investments are the ones that will allow the principle to be there tomorrow, guaranteed.

EE, HH, and I Savings Bonds

Savings bonds have long been a popular gift for young children with the idea that they will mature when the recipients become adults. Money is given to the government for a period of time to accrue interest. Even if the bank that issued the bond goes out of business, the bond will still be there.

The popular misconception about savings bonds is that they are not as good to have in a portfolio because they do not allow for the type of growth that other investments do.

While it is true that bonds are a safe place to park money that is unexciting, it is also true that there is almost no risk of losing the money that is parked in them. When bonds, such as an HH bond, stop paying income to its owner after 20 years, the original money paid into it is still there to be received after two decades of earnings.

Treasury Bills

Treasury bills, or T-Bills, are much the same as bonds, except instead of the investment maturing over many years, it does so over the period of one year or less. A T-Bill is purchased below the par amount, which is the amount that it will mature to. For example, if an investor paid $99 for a 13 week, $100 T-bill, then the investment would yield a 4% return.

The money is guaranteed and is freed up to be in another investment, even another T-Bill from one month, season, or year to another.

Certificates of Deposit

Certificates of Deposit, or CDs, are somewhere in between the other two investments with regards to time. According to BankRate.com, CD maturity occurs between one quarter and five years with current growth ranges of 0.35% - 3.59% respectively for an investment of $2,500. Just like bonds and T-bills, when the investment has matured, there is interest and the original principle.

While these safe investments may not offer tax breaks like real estate and the stock market, they are a guarantee that offers peace of mind and all of the money invested plus some. And that can be worth more than any gains.

Sources

The copyright of the article Low Risk Investments in Investment is owned by Christopher Pascale. Permission to republish Low Risk Investments in print or online must be granted by the author in writing.