What Are The Safest Investment Options for Earning a Good Return Over Time? A Financial Expert Explains. In times of financial uncertainty, these options can provide a safe and reliable way to invest your money.

A safe investment typically refers to an option that is considered to have a low level of risk compared to other investment opportunities. While there is no completely risk-free investment, a safe investment aims to preserve capital and provide a stable return over time.

Some of the common characteristics that define a safe investment are as follows.

• Capital preservation: Safe investments prioritize protecting the initial investment amount. The risk of losing money is minimal or relatively low.
• Low volatility: Safe investments tend to have relatively stable and predictable returns without significant fluctuations in value. They aim to avoid large and sudden price swings.
• Liquidity: Safe investments often offer high liquidity, meaning they can be easily bought or sold without causing a significant impact on their value. This allows investors to access their funds quickly if needed.
• Steady income: Safe investments frequently generate consistent money flow, such as interest payments, dividends or rental income. This income stream adds to the overall stability of the investment.
• Government-backed or high credit quality: Safe investments may include government bonds or highly rated corporate bonds — which are considered to have low default risk. These investments are backed by the financial strength and stability of governments or reputable organizations.

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Safe investments that can deliver a decent return

Here are some of the most secure investments that you can find these days that can drive you a decent APY. These options provide a relatively low-risk situation to the investor.

1. Municipal bonds

Municipal bonds, also known as "munis," are debt securities issued by state or local governments, municipalities or their agencies to raise capital for public infrastructure projects or other government initiatives. These bonds can drive 3-5% APY.

When you invest in a municipal bond, you are essentially lending money to the issuing government entity. In return, the issuer promises to make regular interest payments (coupons) to you over a specified period. At maturity, the issuer repays the bond's face value (principal) to the investor. Also, the interest income from municipal bonds is typically exempt from federal income tax and in some cases, state and local taxes as well. This can result in higher after-tax returns.

Municipal bonds are considered relatively safe since they have a lower risk of defaulting on their debt compared to corporations. Municipal bonds are backed by the issuing municipalities. When a municipality issues bonds, it pledges its full faith, credit and taxing power to repay the bondholders. This means that the issuing municipality is legally obligated to repay the principal and interest payments to bondholders.

That being said, it's important to note that while municipal bonds are generally considered safe, there is still a risk of default. Municipalities can face financial difficulties or economic challenges that may impact their ability to repay bondholders, so make sure to research the issuer's financial health and credit rating.

You can buy individual municipal bonds through a broker or financial institution. Another option is to invest in municipal bond funds, such as mutual funds or ETFs. These funds pool investors' money to buy a diversified portfolio of municipal bonds, providing instant diversification and professional management.

2. Government bonds

Government bonds are like loans you can make to the government. When you invest in them, you're essentially giving your money to the government while they promise to pay you back with interest. The interest payments are made regularly, and when the bond matures, the government gives you back the original amount you lent.

These bonds are considered safe because the government has the power to collect taxes and print money, so it's very unlikely they'll default on the payments. Credit rating agencies also assess these bonds, so you can get an idea of how reliable they are.

There are different ways to invest in government bonds. You can buy them directly from the government through their treasury departments or agencies. Another option is to invest in bond funds or exchange-traded funds (ETFs) that hold a mix of different government bonds.

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3. High-yield savings

High-yield savings accounts are a great way for investors to earn more money on their savings these days. When you open a high-yield savings account, you put your money into the account and the bank pays you interest on the amount you have saved.

The interest rate is usually higher than what you would get with a regular savings account. You can easily access your money whenever you need it by making withdrawals or transfers.

Managing your high-yield savings account online is convenient and flexible. Just like certificates of deposit (CDs), high-yield savings accounts are insured by the FDIC. This means that if the bank fails, your deposits are protected up to a certain limit (usually $250,000 per person, per bank). This ensures that your money is safe.

Remember to explore different banks or online financial institutions that offer high-yield savings accounts. Compare the interest rates, fees, account features and customer reviews to find a trustworthy and suitable option.

4. Certificates of deposit (CDs)

Certificates of deposit (CDs) are like savings accounts that you can open at banks or credit unions. They can earn you around 5% interest in 2023 if you choose a short-term CD.

Here's how they work: You give a certain amount of money to the bank or credit union for a fixed period, which can be a few months or up to several years. In return, they pay you interest on that money. CDs are usually insured by the FDIC, which means that if the bank fails, your money is protected up to $250,000.

The good things about investing in CDs are that they offer stability, predictable returns and help preserve your capital. You can count on a guaranteed interest rate for the whole term so that you know exactly how much you'll earn. This makes CDs attractive for people who don't like taking risks and want to keep their investments safe.

Investing in CDs is pretty simple. You just need to get in touch with the bank or credit union where you want to invest and ask about their CD options. However, it's always a good idea to check out different banks and credit unions to find the best CD interest rates and terms that match what you're looking for.

Once you've decided where to put your money, you'll need to transfer the funds from your bank account to the CD account. Most financial institutions allow you to do this online, but some might require you to go to a branch in person.

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Why do investors look for safe investing options?

When the global economy is going through changes, a lot of investors want to reduce the risk and invest more money in safe options. Here are some reasons why.

• Uncertainty: When there's a lot of uncertainty in the economy, investors want peace of mind. They prefer fixed interest rates with lower risk, as it can be a good way to preserve wealth and avoid financial problems — even during challenging times.
• Higher interest rates: In the past few years, interest rates have been very low. As a result, safe investments have had lower returns. However, with interest rates rising significantly, these investments can now yield around 4-5% annual percentage yield (APY), which is quite good compared to other investment types.
• Recession: Many financial experts have believed for years now that we might be heading towards a recession (so far, it hasn't happened). During a recession, investors tend to put their money into safer investments because the stock market and real estate usually decline, based on historical data.