There are lots of different types of investments you can make with your cash, but you don’t want to choose just any of them. It is important that you take the time to get all of the information you can about each type of investment before making a final decision. When you take the time to do this research, you will be able to decide on the right overall option. The last thing you want to do is to rush into a certain investment decision.
1. Certificates of Deposit
Certificates of deposit or CDs are federally insured time deposits that have specific maturity dates that can range from just a few weeks to several years. You will not be able to withdraw the money for a certain amount of time without incurring a penalty though. The financial institution pays you interest at regular intervals. Once the CD has matured completely, you will get your original principal back plus the accrued interest.
2. Money Market Accounts
A money market account is essentially an FDIC-insured, interest-bearing deposit account. This sort of account is completely different than money market funds, which are just mutual funds that are normally not FDIC-insured. You will find that money market accounts usually earn higher interest than savings accounts, and they require higher minimum balances.
3. Money Market Mutual Funds
Money market mutual funds, which are also known as money market funds, are a great savings and investment option offered by banks, mutual fund companies and brokerages. These funds are regulated by the Securities and Exchange Commission or SEC. These funds have historically tried to maintain a share price of just one dollar, though there is never any guarantee that a fund will be able to hold a share price.
4. T-Bills, Treasury Notes, Treasury Bonds
Treasury Bills or T-bills are short-term debt instruments issued by the U.S. government to raise money to pay for various projects as well as to pay its debts. T-bills are not technically interest-bearing, and they are sold at a discount from their face value. When they fully mature, the government pays you the face value. They are issued in terms of two, three, five, seven and ten years and pay interest every six months until maturity.
5. Government Bond Funds
Government bond funds are essentially mutual funds that invest in debt securities issued by the U.S. government and its various agencies. The funds invest in different debt instruments like T-notes, T-bills and mortgage-backed securities issued by government-sponsored enterprises like Freddie Mac and Fannie Mae. There are some risks involved with these investments, though the level of risk is fairly low. If you are looking for a good low-risk investment to make, this is one of the better options you have.
6. Municipal Bond Funds
Municipal bond funds invest in a wide range of municipal bonds issued by state and local governments. Any interest that is earned is usually free of federal income taxes, and also may be exempt from state and local taxes. Individual bonds always come with the risk of default, meaning the issuer becomes unable to make further income or principal payments. All in all though, it is still fairly low-risk.
7. Short-term corporate bond funds
Short-term corporate bond funds invest in bonds that are issued by corporations. These bonds have an average maturity period of 1-5 years. As with other bond funds, short-term corporate bond funds are not FDIC-insured. The fact is that these bond funds can reward you with higher returns than Treasuries, but there is always the chance that companies will have their credit rating downgraded.
With all of the different types of investment opportunities, you will need to make a point of selecting the right ones. There is always risk involved with every type of investment, but you will have to take the time to decide which risks you are willing to take. All of these are fairly “safe” investments, but you will still need to do your homework. It is important to have a widely diversified investment portfolio, so you will have to keep that in mind as well. Everyone likes a safe investment, but you’ll never get anywhere without taking some risk.