The safest investment is when the risk is zero. You are probably looking for stability when you invest your hard earn money. High return investment options are volatile and can be tempting. They might offer high earning potential, but there’s a risk that you could lose some or all of your investment. If you prefer no risk, the trade-off is lowering the risk exposure of your investment and being willing to accept a lower but consistent return.
Fortunately, there are safe ways to invest money. Low risk investments can benefit you overtime and offer a decent return. It is important to keep your money safe even if it grows slowly as it offers you a reliable rate. This way, you can avoid the emotional toll and fear of losing all your savings to risky investments.
If you are unsure about your investment options, seek help from a financial planner who understand the various Canadian investment products and solutions. The planner can provide you with more insights and offer the safest ways to invest money with no risk.
Here are seven safest ways to invest money and still have an acceptable earning potential:
1. High Yields Saving Account
Opening a high yields saving accounts is one of the safest ways to invest money. With this account, you do not have to worry about market trends or watch your money. A high yields saving account offers a high interest rate. You can save your hard-earned money without worrying about losing the principal amount.
These accounts offer better than average interest rates for investors. There might be a minimum balance requirement, but this will ensure you have a better interest rate and earning potential in the long run.
2. Guaranteed Investment Certificate (GIC)
The GIC is another safe way to invest money. You can sleep well at night knowing that your principal amount is always safe and you are earning in addition to that. The GIC is a smart way to invest and earn on your principal amount. This type of investment offers a guaranteed rate of return over a specified period of time.
If you choose to keep your money invested for 1, 2 or 3 years and more, you are guaranteed a return and no risk on your principal amount. There are financial institutions that offer 3.10% returns for a one year GIC and 3.25% for a 2 year GIC. Market or economic trends do not affect your investment.
3. Tax Free Savings Account (TFSA)
This investment method is simple. The TFSA offers tax-free earnings. You can enjoy the interest earnings and capital gains, which can be withdrawn at any time tax-free. You need not have to worry about a tax penalty and are free to withdraw your money at any time. The TFSA allows you to save as well as shelter your investment from taxes regardless of your annual income.
4. Pension Funds (RRSP)
With the Registered Retirement Savings Plan (RRSP), you save for your retirement and gain special tax advantages. You get immediate relief on your income each year when you contribute to your RRSP account. There are companies in Canada that match your contributions. The more you add, the more you save for your future. Additionally, pension funds are not taxed unless withdrawn for personal use and before retirement.
5. Annuities or Registered Retirement Income Fund
If you want a safe way to invest money, you should consider the Registered Retirement Income Fund (RRIF). This type of investment is not commonly discussed. It is available at banks and at some life insurance companies. This form of investment guarantees an income for life and there is no market fluctuation or interest rates.
Once you set up a RRIF, you cannot add more money into that account. However, you can open more than one RRIF. The advantage with RRIFs is that you can decide how much money you want and how frequent your income should be. You also have the flexibility to make changes when your circumstances change.
6. Term Deposits
If you want a stable and secure type of investment, term deposits can be a perfect choice. There is zero risk of losing money on your investment and you have quicker access to the funds. These type of investments are similar to GICs, but they offer lower interest rates and mature within a shorter period like within 6 months.
There are term deposits that can be withdrawn before the maturity period. Term deposits offer a fixed interest rate that is guaranteed. Rates remain fixed for the agreed period. You do not have to worry about rising or falling interest rates when you consider this option.
7. Diversified Portfolio
This investment type is the best way to spread risk or consider various low risk options. Try to find all the low risk options and invest your money into these choices. If you diversify properly, your portfolio value will increase and you are not likely to lose your investment. For example, you can combine a few GICs, RRSP, TFSA and a high yield savings account. Find a financial institution that will offer you a good rate for all of your low risk investment options.