Sadly, there’s no such thing as one “best” low-risk investment that suits everyone’s needs. Still, you can find investments that offer income or diversification, which usually reduces your risk by spreading out your money. Whether you’re a cautious investor or just trying to beat rising costs, here are a few options to consider, with the riskier ones at the end. 

Most investments have some degree of risk — it’s up to you to choose what type of risk you’re okay with.

1. High-yield savings accounts

High-yield savings accounts (HYSAs) provide a relatively safe haven for your hard-earned cash. You can open an account online through traditional banks, credit unions, and even some brokerages. 

While HYSA interest rates vary between financial institutions, they typically outshine traditional savings rates. They may even beat inflation. Plus, you can take out the money whenever you need it. Another benefit is that FDIC insurance protects the cash in case of bank failure — up to $250,000 per account type. 

In other words: HYSAs limit the risk you’ll lose money, making them useful for:

  • Cash for near-term purchases 
  • Emergency funds
  • “General” savings you don’t want to expose to higher risk 

However, you’ll want to check for account fees, as these can eat into your earnings. 

2. Certificates of deposit (CDs)

Certificates of deposit (CDs) let your money grow for a set time, from a few months to several years. With returns that can match or beat HYSAs, CDs offer another way to save. Many banks and credit unions offer CDs, complete with FDIC insurance. 

However, unlike some savings accounts,  CDs may require a minimum deposit. Many also “lock up” your money for a period of time. Trying to access your cash early may trigger fees — typically a portion of your earned interest. Or, you can opt for a no-penalty CD that lets you access your money when you need it. (Usually in exchange for lower returns.) 

3. Money market accounts and funds

Money market assets mix safety and yield, making them attractive if you want liquidity and returns. They’re often used to stash cash you may want to access in the near future, such as for a large purchase or investment. 

Money market accounts

Money market accounts, found at many banks and credit unions, combine some features of savings and checking accounts. Like most deposit accounts, they protect your dollars with FDIC insurance. They may offer debit and ATM privileges but limit how often you can access your money. Money market accounts also tend to pay higher interest rates than regular savings accounts. 

Money market funds

Money market mutual funds invest in shorter-term, lower-risk assets like Treasurys, CDs, short-term corporate debt, or municipal bonds. Since they tend to focus on high-quality assets, they can be less volatile than other types of funds. However, you may earn smaller returns than riskier investments. 

Money market funds offer diversification and liquidity. But they also have downsides, like fluctuating income and lack of FDIC insurance. 

4. Treasury securities

Treasury securities are issued and backed by the U.S. government. Technically, buying Treasurys means loaning money to the federal government, which agrees to pay you back with interest. Since the government guarantees repayment, they are considered lower-risk investments. 

Interest earned from Treasury securities is exempt from state and local taxes, though you still owe federal taxes. You can invest in several kinds of Treasurys depending on your needs. 

For instance, short-term investors may invest in Treasury bills, which mature in under 1 year, or notes, which mature in 2–10 years. 

Longer-term investors may choose Treasury bonds, which usually mature in 20–30 years. They also pay interest every 6 months, offering regular, long-term income. Series I bonds in particular adjust their rates to match inflation, making them helpful to combat rising costs. 

5. Municipal and corporate bonds

Like stocks, most bonds involve more risk than savings options, but they’re a great way to diversify your portfolio. Bonds are a method of loaning money to governments or companies in exchange for interest payments. They can offer reliable income with varying levels of risk. 

Municipal bonds

Municipal bonds, or “munis,” are issued by states, cities, and other government bodies. The issuers sell them to fund daily operations or building projects. Profits on these relatively low-risk assets are exempt from federal and sometimes local taxes. While you can usually buy them right from the issuing entity, they’re somewhat illiquid (hard to sell). 

Corporate bonds

Corporate bonds are fixed-income securities issued by public companies. Corporate bonds often pay more interest than government bonds, increasing your income potential.

Credit agencies rate the ability of companies to repay their bonds. Higher ratings suggest stronger financial health and the potential to make its payments over time. Companies with better credit ratings issue “investment-grade” bonds. However, corporate bonds may present more risk if the company struggles and can’t make payments. 

Bond funds

Another way to profit from bonds is through bond ETFs and bond mutual funds. 

These funds pool together bond investments and then sell shares in the fund, letting you instantly own parts of many bonds. Since the funds can regularly buy and sell assets, you don’t need to worry about managing your holdings. 

You can choose funds that meet your goals, like higher-yield or eco-friendly bonds that raise money for environmentally conscious projects. That said, you’ll want to watch for higher fund or management fees.  

6. Fixed annuities

Insurance companies sell annuities to investors seeking guaranteed returns, usually over 3–10 years. These investments require paying into the annuity, either over time or in a lump sum. They then earn tax-deferred interest, which delays taxes until it’s time to take your payment. (Again, either in a lump sum or over time.) 

Many also adjust with the cost of living to ensure your money keeps pace with rising prices. 

The downside: many annuities lock up your funds now in exchange for cash later, so you can’t easily touch your money. However, their tax-deferred growth and steady income potential can give you peace of mind in retirement.  

7. Preferred stocks

Stocks in general present more risk than many other assets on this list. However, owners of preferred stocks get a “preferred” claim on the company’s assets and earnings compared to common stockholders — people who own regular shares. 

As a result, if a company issues dividends, preferred stockholders get paid first. If the company goes bankrupt, preferred stockholders are also more likely to receive compensation before common stockholders. These investments may offer higher payouts with regular income and more predictability. 

Preferred stocks can blend certain features of bonds and common stocks, like:

  • Fixed dividends
  • Higher payouts than common stock
  • Giving investors “dibs” on assets over common stockholders if the company goes bankrupt
  • The possibility of lower taxes on dividends

Investors can use preferred stock to earn regular income with lower risk than buying common stock. Since preferred stocks trade on exchanges, they’re relatively liquid (easy to buy and sell) investments. However, they don’t usually come with voting rights. 

8. Real estate crowdfunding

Until recently, real estate investing required large sums of money to get started. Crowdfunding real estate platforms now gives everyone the chance to diversify and gain property exposure with smaller amounts. 

These platforms let you profit from real estate without dealing directly with a mortgage or property ownership. By pooling your money with others, you can invest in larger ventures than you could not afford alone. However, most crowdfunding sites require minimum investments, incomes, or net worths. As always, do your research!

By some estimates, annual returns can reach 8–14%, which can beat the S&P 500’s long-term 10% average. 

9. Farmland investments

Historically, profiting on farmland involved working the land or selling it after its value rose. But as global food demand continues to increase and investment options improve, everyday investors can profit from these stable, long-term assets.   

Instead of buying the land yourself, which could cost millions, you can:

  • Buy farmland through farmland-focused crowdfunding platforms   
  • Invest through specialized REITs (real estate investment trusts) that buy, maintain, and/or operate properties and pass the profits to investors
  • Purchase farmland-related stocks, mutual funds, or ETFs

Each of these options has upsides and downsides, but most let you get in (and diversify) with smaller sums.  

Choose wisely to secure your financial future

Lower-risk investments don’t have to be boring, but they should be dependable. Generally, interest-paying deposit accounts offer the most safety. Or, you can branch into less commonly traded assets like real estate or farmland. Like much in investing, the secret is balancing risk and reward (and a bit of research).