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Do the volatile ups and downs of the stock market make your stomach churn? Does the thought of buying a fixer-up to flip give you pause? Do you break out in a nervous sweat whenever someone suggests getting into crypto?
If you answered yes to any of these questions, you probably have a low risk tolerance. You worry more about losing money than missing out on the opportunity to make more of it.
Being cautious about how you invest your money is a good thing. But if you’re so risk-averse that you avoid investing altogether, you’re putting your money at greater risk than you think.
Do Safe Investments Actually Exist?
When you think about the risks of investing, you probably think about losing principal, ie, the original amount you invested. If you keep your money in a savings account, there’s virtually no chance of that happening because deposits of up to $250,000 are insured by the Federal Deposit Insurance Corporation (FDIC).
But consider that savings accounts, on average, pay just 0.13% APY, while inflation hit 8.5% in 2022.
So while you’re not at risk of losing principal by stashing your funds in savings accounts, you could still lose purchasing power. In personal finance, purchasing power risk means that your money will lose value if it doesn’t earn enough to keep up with inflation. If inflation continues at 8.5%, buying $100 worth of groceries will cost you $108.50 a year from now. If you’re saving over decades toward retirement, you’ll be able to buy a whole lot less groceries in your golden years .
There’s also the risk of missed opportunity. By playing it too safe, you’re unlikely to earn the returns you need to generate income and grow your savings into a sufficient nest egg.
Though there’s no such thing as a risk-free investment (all investing involves risk!), there are plenty of safe ways to invest your money.
The 8 Best Low-Risk Investments
Here are eight options that are good for conservative investors….
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