Low Risk Investments - Playing it Safe

Once you have enough savings to meet those unexpected expenses, it's time to diversify your assets into different types of investments. Having a variety of investments from low to higher risk can help level out the inevitable ups and downs of your investment returns.

As we saw in the last topic, how much risk you feel comfortable with is a matter of personal preference. While some people will feel more comfortable making aggressive investments, everyone should have some percentage of low risk investments to ensure basic financial security. How much of your portfolio is low risk will vary based on your risk tolerance and capacity.

Any investment carries the risk of loss, but some carry a lower risk than others. Putting your money in a money market account or a CD carries a low amount of risk but also will earn you a low reward – very small interest rates. Although the returns on these types of accounts often barely keep up with inflation and taxation, they do give you some return on your money.

If you keep your money at home, you won't make any interest, and you'll have the risk that it could be stolen or lost in a fire or some other type of accident.

Essential Question

• What are some low risk investment vehicles that I should include in my investment portfolio?