Experts: Here’s What You Should Feel Most Comfortable Investing In

Investing money comes with a certain level of risk, but it’s natural to want to put your money where it will be the safest while still yielding a good return. GOBankingRates recently surveyed 1,045 Americans ages 18 and older about personal finance and investing, and found that about 68% of people are investing their money. The highest percentage of them felt that individual stocks were the place they feel the most comfortable investing their money, followed by online savings accounts.

The Safest Investment Options

Since not everyone has done the research to truly understand investing options, GOBankingRates turned to financial experts for advice on the safest investment options:

Diversified Index Fund

John Jennings, president and chief strategist of St. Louis Trust & Family Office, recommends buying a diversified index fund rather than individual stocks. Mathematically, most stocks underperform the stock market over time, and from 2000 to 2019, 74% of stocks in the S&P 500 underperformed. This means that when you buy an individual stock, it’s like flipping a weighted coin, where you lose most of the time. Your portfolio will probably perform better if you buy a broad index fund that tracks the U.S. stock market or even one that tracks all global stocks.

High-Yield Savings Account

General savings accounts may be safe, but they’re not as competitive a financial product because you don’t earn interest and thus your money doesn’t keep up with inflation. However, a high-yield savings account is one of the safest options as it offers a guaranteed return on your savings. Rising interest rates have finally made these types of accounts competitive again, and a high-yield savings account provides easy access to your funds and protects your principal.

Certificates of Deposit (CDs)

Another safe, but not especially high-yield, investment is a certificate of deposits (CDs). CDs are time deposits offered by banks with fixed interest rates and maturity dates. They are considered low-risk investments as long as you choose reputable financial institutions. The longer the term, the higher the interest rate.

Blue-Chip Stocks

Blue-chip stocks are another kind of stock that’s relatively safer compared to smaller or more volatile stocks. They are associated with well-established, financially stable companies that have a long history of success. Blue-chip stocks are typically associated with companies that have a strong market presence, solid balance sheets, and consistent dividends.

Exchange-Traded Funds (ETFs)

Exchange-traded funds provide investors with a diversified investment strategy by offering exposure to a diverse array of assets, thereby reducing the risk that is associated with investing in individual stocks. ETFs are traded on stock exchanges, which makes them available to the average investor because stock exchanges provide liquidity.

Consider Your Risk Tolerance

What is safe for one person may not be for another. Ryan Bannister, a licensed CPA and the founder of a financial planning firm 1Up Financial Advisors, says, “As a CPA and financial planner, I help my clients answer these based on their time horizon (i.e., how long they have to invest), their short- and long-term goals, and risk tolerance.”

Related Facts

• Investing money inherently comes with a certain amount of risk.
• Approximately 68% of Americans are currently investing their money.
• The highest percentage of people, 20%, feel the most comfortable investing in individual stocks.
• A high-yield savings account provides a guaranteed return on your savings.
• The longer the term of the CDs, the higher the interest rate.
• Blue-chip stocks are associated with well-established, financially stable companies.
• ETFs provide investors with a diversified investment strategy.

Key Takeaway

While there are no completely risk-free investments, there are relatively safe investment options for the average person. Investing in a diversified index fund, high-yield savings account, CDs, blue-chip stocks, and ETFs provide a sense of security, and investing based on your risk tolerance can increase your chances of seeing returns on your investments.

Conclusion

Investing money comes with a certain amount of risk, but by choosing the safest investment options and understanding your own risk tolerance, you can ensure a sense of security in your investments. Always do your research and consult with a financial expert to make the best decisions for your financial future.