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:

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

Investing can be a daunting task, especially in an ever-changing financial landscape. To protect your hard-earned money and achieve long-term growth, it's crucial to identify characteristics that define safe investments. Safe investments are typically associated with lower risk, providing investors with peace of mind amid market volatility. They often offer a reliable return and greater levels of liquidity, making them suitable for individuals seeking stability. Understanding these key characteristics allows investors to make informed decisions, helping them to build a balanced portfolio that safeguards their assets while still fostering growth. Whether you're a seasoned investor or just starting, recognizing the traits of safe investments is essential for achieving your financial goals.

Low Risk

Safe investments have a low-risk nature. They are designed to minimize potential financial losses. Unlike volatile assets, such as stocks or cryptocurrencies, safe investments show less dramatic price fluctuations. This provides a sense of security. The lower risk profile appeals to conservative investors, retirees, or those who cannot afford significant losses. Although the returns on low-risk investments may not be as high as those on riskier assets, they offer a steady option for wealth protection. Common examples include government bonds, money market accounts, and high-yield savings accounts.

Stability

Safe investments provide stability that riskier investments cannot guarantee. They usually deliver predictable and consistent returns. This allows investors to plan with confidence. Stability is important for individuals who rely on their investments for regular income. This includes retirees or those funding long-term financial goals, such as education or housing. The performance of safe investments is generally insulated from market fluctuations. This makes them a reliable choice during economic uncertainty or market downturns. Examples of stable investments include U.S. Treasury securities, municipal bonds, and certain types of anannuities. These options offer a predictable income stream.

Capital Preservation

Safe investments focus on capital preservation. The main goal is to protect the principal amount of the investment. This ensures that investors do not lose their initial capital. This feature appeals to those nearing retirement or those who are risk-averse. They can maintain their portfolio’s value while earning modest returns. Safe investments are not designed to yield high returns. Instead, they aim to protect and grow wealth at a modest rate over time. Examples of such investments include certificates of deposit (CDs), fixed annuities, and government-backed bonds. These assets help reduce risks related to market volatility and inflation by maintaining the original investment.

Benefits of Safe Investments

Investing can help accumulate wealth. However, safety should always be a priority for investors. Safe investments have lower risks and more predictable returns. These investments can enhance financial security. They appeal to risk-averse individuals and those nearing retirement. People want to protect their capital from market swings. Safe investments offer several advantages. They help preserve principal and generate consistent income. They can also reduce stress in managing a financial portfolio. Understanding these benefits allows investors to make informed decisions. This can lead to a more stable financial future.

Protection Against Market Volatility

Safe investments are important during economic uncertainty and market turbulence. In times of financial instability, such as recessions or stock market downturns, high-risk investments can decline sharply in value. Safe investments tend to be insulated from these fluctuations. Assets such as government bonds, high-yield savings accounts, and certificates of deposit (CDs) are generally not as affected by market volatility. This ensures that your investment remains secure, even when riskier assets fall in value. This feature is valuable for conservative investors or those nearing retirement who want to avoid major losses and protect their financial portfolio.

Predictable Returns

Safe investments usually offer lower returns than aggressive options. However, they provide a stable and predictable income. This consistency is ideal for investors seeking steady financial growth. These investments do not aim for rapid wealth accumulation. Instead, they offer modest returns over time. Predictability is important for those with structured financial plans. This is especially true for individuals who depend on investments for regular income, such as retirees. For example, bonds, fixed annuities, and CDs provide fixed interest rates or payments. This allows investors to predict their financial future with confidence. This reliability helps reduce uncertainty compared to more volatile investments. It also makes it easier to manage both short- and long-term financial goals, like saving for retirement or purchasing a home.

Peace of Mind

Safe investments offer peace of mind. They protect your capital during uncertain economic times. Unlike high-risk assets, safe investments help safeguard your principal. Even if the returns are modest, the reduced risk of loss is significant. This is especially important for risk-averse investors or those with a short investment horizon. They cannot afford to wait for the market to recover after a downturn. Safe investments allow for confidence in the security of your money. They are less vulnerable to the dramatic losses that come with riskier strategies. Whether you want to preserve wealth for future generations, protect retirement savings, or reduce financial stress, safe investments provide a reliable foundation.

Considerations in Choosing Safe Investments

When building an investment portfolio, safety is a key consideration. Investment opportunities include stocks, bonds, real estate, and mutual funds. The level of risk varies among these options. It is important for both new and seasoned investors to understand this landscape. Factors that determine investment safety include the issuer's credibility and market volatility. Economic conditions and personal financial goals also play a role. Diversification, risk tolerance, and time horizon are important components to evaluate. By carefully considering these factors, investors can make informed decisions. This helps balance the desire for returns with the need to preserve capital.

Time Horizon

Your investment time horizon is crucial for selecting safe assets. For short-term goals, like saving for a vacation or an emergency fund, you should focus on investments that offer liquidity and stability. Options include high-yield savings accounts, money market accounts, or short-term bonds. For medium-term goals, such as a down payment for a home within 5 to 10 years, consider a mix of conservative bond funds or staggered certificates of deposit (CDs). Long-term goals, like retirement savings, can still benefit from safe investments, including Treasury bonds or inflation-protected securities. However, you might also include some moderate-risk investments to help boost returns over time. Matching your investment time horizon with suitable safe assets ensures you have the necessary funds available when needed, while minimizing risk.

Financial Goals

Defining your financial goals clearly can help you choose safe investments that fit your needs. Safe investments are often preferred for goals focused on capital preservation and steady growth. For example, if you want to build an emergency fund, consider liquid options like a high-yield savings account or a money market fund. These options provide quick access to cash when necessary. If you're saving for a major life event, such as buying a home, you might prioritize stable growth options. Bonds or fixed annuities offer modest returns with low risk to your capital. For retirement income, you may need a mix of stable investments like bonds, dividend-paying stocks, or annuities. This approach can help ensure a reliable income stream without depleting your assets.

Risk Tolerance

Your personal risk tolerance affects how you choose safe investments. Safe investments generally have lower risk compared to stocks or speculative assets. However, this lower risk often leads to more modest returns. You should evaluate how comfortable you are with this trade-off. If you prefer to avoid any loss, options like government bonds or insured savings accounts may be best. If you can accept a bit more risk for the chance of higher returns, consider high-quality corporate bonds, conservative bond funds, or dividend-paying stocks. Understanding your risk tolerance helps you find a balance between security and growth. This ensures your investments meet both your financial goals and your comfort level.

Current Financial Situation

Your financial situation affects the types of safe investments you choose. If you have a stable income and manageable expenses, you may allocate more to long-term investments like bonds or annuities. If your situation is uncertain, you might focus on short-term investments, such as money market accounts or savings accounts. These options provide quick access to funds without exposing you to market volatility. It's also important to consider your debt levels and monthly financial obligations. These factors can influence how much you can invest in lower-risk assets without impacting your daily finances. Understanding your overall financial picture helps you make informed decisions about safe investments in your portfolio.

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. 

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