For beginners, low-risk investing can be a good place to start, but they can also help balance diverse and complex portfolios.
A common approach to investing requires a range of strategies, where low-risk investments balance out high-risk alternatives. Whenever you invest, consider your full portfolio and see what risk level makes the best sense.
Knowing your alternatives is a good place to start. For beginner investors, here are 7 common types of low-risk investments:
How to diversify your investment portfolio.
The most common investment with the least amount of risk is a high-yield savings account. CD's, money market market accounts and Treasury bonds can also be grouped as low-risk investments.
Mutual funds come in many shapes and sizes, including some that are actively managed to be low-risk. ETFs can be manipulated to lower your risk, when poor performing stocks can be traded quickly.
Neither of these are FDIC-insured. Review them closely before investing.
Whenever you invest, consider your risk tolerance and if the investment at hand is in balance with the rest of your portfolio. Here are three ways to keep your investment risks in check.
1. Keep a diversified portfolio
Multiple investments with different risk profiles can ensure you’re protected against sudden major losses. Also, spreading your investments across various asset classes (like stocks, bonds, savings and even real estate) protects against financial downfall in one market or segment.
2. Set clear goals
Setting goals can help guide your investments, especially in determining your risk tolerance. Clear financial goals can help you make informed decisions.
3. Monitor your investments
You no doubt carefully research your investment decisions. But it’s also important to monitor your investments, to make sure they stay on track, especially outside of the low-risk range.
Bright can build a financial plan tailored to you. It’s a good place to start before investing. Bright can help grow your savings, so you’re covered for emergencies, and your Bright Plan offers a step-by-step guide to reaching your goals.
With the kind of financial stability a Bright Plan provides, you can invest with confidence and begin to build more wealth.
If you don't have it yet, download the Bright app from the App Store or Google Play. Link your checking account and your credit cards, set a few goals and let Bright get to work!
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With a postgraduate degree in commerce from The University of Sydney, Pranay has his finger on the pulse of the finance industry. Breaking down complex financial concepts is his forte.