Best Safe Investments for 2024: Grow Your Money Safely

As we navigate through uncertain economic times, many investors are seeking safe havens to protect their hard-earned money while still generating modest returns. Building a diversified investment portfolio is the foundation of any growth opportunities. But there are noninvestment options like high-yield savings accounts or low-risk options like CDs that can help mitigate risk and prepare you for the uncertainties ahead. 

In this article, we'll explore the best safe investment options for 2024, helping you grow your money securely without excessive risk. Read on for an overview of the best safe investments, to help you build a diversified, risk-balanced portfolio. 

Best Safe Investments at a Glance:

Understanding Safe Investments

Safe investments are financial instruments that prioritize capital preservation and offer relatively low risk compared to more volatile investments like stocks, ETFs, or cryptocurrencies. Safe investments aim to provide stable and predictable returns while minimizing the potential for significant losses. 

Safe investments are particularly attractive for investors with lower risk tolerance, those nearing retirement, or those seeking to safeguard a portion of their portfolio from market fluctuations. However, nearly all investors should consider keeping a portion of their portfolio in safe investments to help mitigate risk. 

When evaluating safe investments, it's essential to consider factors such as credit quality, liquidity, and issuer creditworthiness. You will want to carefully review the terms, conditions, and historical performance of each investment option to ensure alignment with your financial goals and risk appetite.

Some of the options below are not technically investments. Savings accounts, high-yield savings accounts, and money market accounts are government-insured, up to $250,000 per account, per account holder. That means if you and your spouse are joint account holders of a high-yield savings account, you could keep up to $500,000 in the account ($250,000 each) with Federal Deposit Insurance Corporation (FDIC) insurance protecting your funds. 

For the sake of this comparison, we'll consider all places to store your money safely, whether it is a traditional low-risk investment like T-Bonds or CDs, or a savings account. 

Characteristics of Safe Investments

Safe investments are typically characterized by the following:

• Low risk: These investments are designed to minimize the potential for significant losses, offering a lower risk profile compared to more speculative or volatile assets like stocks.
• Stability: Safe investments tend to exhibit relatively stable and predictable returns, making them suitable when you're seeking consistent income or capital preservation.
• Capital preservation: A primary objective of safe investments is to protect the principal investment amount, ensuring that you can maintain your initial capital investment while generating modest returns.

Benefits of Safe Investments

Investing in safe or lower-risk options can provide several benefits, including:

• Protection against market volatility: Safe investments act as a buffer against market turbulence, offering a level of stability and security during periods of economic uncertainty or market downturns.
• Predictable returns: While the returns on safe investments may be lower compared to riskier options, they offer a dependable stream of income or modest growth, making it easier to plan and manage your finances.
• Peace of mind: Safe investments can provide you with a sense of security, knowing that your capital is relatively well-protected and less susceptible to a significant loss.

Types of Safe Investments

If you're planning to build a diversified, risk-balanced portfolio, there are many types of safe investments you can choose. There's no reason you need to stick to one type of safe investment. For many investors, having several different types of lower-risk investments can help balance their portfolio Here are some of the most common types of safe investments you can consider. 

Savings Accounts

Offered by banks and credit unions, savings accounts provide a secure place to store your money while earning a modest interest rate. These accounts are FDIC-insured or NCUA-insured (up to $250,000 per depositor, per institution), making them a low-risk option for storing your savings. 

Traditional savings accounts have lower interest rates — usually less than 1% and often as low as 0.01%. Although liquidity and safety are a plus, other options, such as a high-yield savings account, are better options for long-term savings so that you can earn more interest on your funds. 

Certificates of Deposit (CDs)

CDs are time deposits offered by banks and credit unions, where you agree to leave your money untouched for a specified period in exchange for a fixed interest rate. The period typically ranges from a few months to several years. CDs are FDIC-insured and offer a higher interest rate than regular savings accounts, with limited liquidity during the term. 

Again, a combination of CDs and high-yield savings accounts could be a better option for liquidity. And with current high interest rates on high-yield savings accounts, CDs are less attractive to investors than they once were. 

Treasury Bonds

Issued by the U.S. government, Treasury bonds are considered one of the safest investments available. They offer fixed interest payments and a guaranteed return of principal at maturity, backed by the full faith and credit of the U.S. government. As of May 2024, one-year T-Bonds offer an interest rate of 5.169%, which is better than most high-yield savings accounts. 

If you can afford for your funds to be in a T-bond for a year, with a one-year hold time, it offers strong safety and relatively flexible liquidity. However, you can get T-Bonds for as short as one month. 

Money Market Funds

Money market funds aim to maintain a stable net asset value (NAV) of $1 per share while providing modest returns. These mutual funds invest in short-term, low-risk securities like government bonds, federal agency notes, Eurodollar deposits, repurchase agreements, certificates of deposit, corporate commercial paper, obligations of states and cities, cash, and cash equivalents. Money market funds typically yield between 0.01% and 4%.

High-Yield Savings Accounts

High-yield savings accounts, offered by online banks and financial institutions, typically provide higher interest rates than traditional brick-and-mortar banks, making them an attractive option for parking emergency funds or short-term savings. If you choose a bank or credit union that is FDIC or NCUA (National Credit Union Administration) insured, the account is insured for up to $250,000 per account holder. High-yield savings accounts typically have an APR of 3% to 5.15%, with most offering interest between 4% and 4.5%. 

Dividend-Paying Stocks

Established companies with a history of consistent dividend payments can provide a steady stream of income, along with potential long-term growth. However, it's important to note that stocks carry more risk than fixed-income investments. You can consider dividend-paying stocks as a somewhat higher-risk option in addition to the safest options on this list. 

Real Estate Investment Trusts (REITs)

REITs are companies that own and operate income-generating real estate properties, such as apartments, shopping malls, or office buildings. They offer the potential for steady income and diversification, with more risk than fixed-income investments. REITs offer a passive way to invest in real estate while mitigating risk. They are an attractive option for investors to take advantage of the historical performance in real estate, without the responsibility of property ownership. Another advantage of REITs is that you can invest even a small amount, or diversify your portfolio across many different REITs and other asset classes. 

Preferred Stocks

Preferred stocks are a hybrid product that combines the characteristics of both stocks and bonds. They offer higher dividend yields than common stocks but have a higher claim on assets and earnings than common stockholders in the event of liquidation or bankruptcy. Preferred stocks are issued primarily by investment-grade companies, with average yields of 6-8%.

Preferred stock represents ownership of a company and the right to claim income from the company’s operations, but preferred stockholders have a higher claim on dividends than common stockholders. As a preferred stockholder, you usually don't have voting rights in corporate governance (or only have limited rights). 

Preferred stocks, as with any other stock investment, don't have any guarantees, so they are at higher risk than government-backed options. 

Factors to Consider in Choosing Safe Investments

When selecting safe investments, it's crucial to consider individual financial factors and understand the investments. When choosing safe investments, look at: 

• Time Horizon: Your short-term, medium-term, or long-term investment time horizon will influence the types of safe investments that are most suitable for your needs.
• Financial Goals: Clearly define your financial goals, such as building an emergency fund, saving for a down payment, or generating retirement income, as this will help guide investment choices.
• Risk Tolerance: Assess your personal risk tolerance and determine how much risk you're willing to take with your investments. Safe investments generally carry lower risk but may also offer lower potential returns.
• Current Financial Situation: Consider your current income, expenses, and overall financial situation to determine the appropriate allocation toward safe investments within your portfolio.

Best Safe Investments for Short-Term Goals

For short-term goals — less than three years — such as building an emergency fund, a home down payment, a vacation, or other short-term savings goals, the following safe investments are common solutions:

• High-yield savings accounts
• Certificates of deposit (CDs)
• Treasury bonds (with maturities matching your time horizon)
• Money market funds

These investments offer high liquidity, low risk, and stable returns, making them suitable for short-term objectives like building an emergency fund, saving for a down payment, or preparing for big upcoming expenses.

Best Safe Investments for Long-Term Goals

For long-term goals — five years or more — you may consider incorporating a mix of safe investments like the short-term options above, alongside other asset classes to diversify your portfolio. Some options include:

• Dividend-paying stocks: Well-established companies with a history of consistent dividend payments can provide steady income and potential growth over the long run.
• Real estate investment trusts (REITs): REITs offer exposure to the real estate market while providing regular income distributions and the potential for capital appreciation.
• Preferred stocks: Preferred stocks can offer higher yields than bonds while providing a degree of stability and income.
• Diversified bond funds: High-quality bond funds can provide a steady stream of income while offering more diversification than individual bonds.

For investors who want to optimize growth or with a longer time horizon, you can also consider low-cost index funds, ETFs, and other investment options with higher risk as a portion of your portfolio. But remember to diversify!

Many investment advisors suggest the following percentages:

• Low-risk portfolios: 15-40% equities, and 60% to 85% low-risk (safe) investments
• Medium risk portfolios: 40-60% higher-risk securities, stocks, and funds and 40% to 60% low-risk investments.
• High-risk portfolios: 70% or more securities, stocks, and funds, and 30% or less low-risk investments.

Final Tips on Safe Investments

Safe investments play a crucial role in preserving capital, generating reliable income, and protecting against market volatility. By understanding your investment goals, time horizon, and risk tolerance, you can choose the appropriate safe investment options to build a well-rounded and diversified portfolio. 

Remember, safe investments may offer lower potential returns, but they provide peace of mind and a stable foundation for your overall financial strategy. Whether you're an aggressive investor with a long time horizon, or cruising into retirement, safe investments can play a key role in your financial planning and investment strategies. You can also check out the best stocks, and best trading platforms to combine with safe investments to build a customized portfolio for your investment goals. 

Frequently Asked Questions