Safe and Profitable Solutions for Prudent Investors If you are new to the world of investing, you may want to consider options that are profitable and low risk at the same time. Examples include money market and savings accounts, certificates of deposit, treasury securities, and government bonds. Other products are intended for seasoned investors, including forex trading, contracts for difference, and venture capital trusts. When Risk Varies With some accounts, for example education IRAs, money is invested in different types of products such as bonds, stocks, mutual and money market funds, certificates of deposit, and savings bonds. The level of risk depends on your portfolio. Bonds and stocks can be safe or risky depending on the company of choice. Large, established companies that offer investment-grade bonds are a safe choice. The problem with stocks is that your investments and returns are not guaranteed. Stock values also fluctuate and you may lose your money. Mutual funds are another example. They invest in bonds and stocks and are not insured. Safe Investment Solutions There are safe investment options such as treasury bonds, notes, and bills, savings accounts, and others. Certificates of Deposit Certificates of deposit pay fixed interest and payment is guaranteed by the issuer. The main benefits for holders are that CDs are FDIC insured and offer a higher interest rate than savings accounts and other products. You can open an account with a term of 1 year or 6 months which makes CDs a flexible investment instrument. However, if you make a withdrawal before the term is over, you may face a penalty. The interest rate is either fixed or variable. There are different types of certificates of deposit, including callable, zero coupon, liquid, bump-up, and traditional. Financial institutions also offer high-yield and brokerage CDs. Zero coupon certificates are offered at a discount. There are also brokerage CDs that are more liquid and feature an attractive rate of return. They are offered by banks through brokers and by brokerage firms. Liquid products are a good choice for low-risk investors because financial institutions don’t charge penalty fees for early withdrawal. Savings and Money Market Accounts Savings accounts are offered by credit unions, savings associations, banks, and other institutions. They come with a lower interest rate than other products but are a safe and liquid investment solution. Customers who opt for a money market account are required to maintain a higher minimum balance in exchange for higher yields. This product is offered by mail and by different banks and brokerage firms. Some funds invest in different bonds and treasury bills while others hold municipal bonds only. In addition to these products, prudent investors may consider government savings bonds that pay interest on redemption. The term varies and can be as long as 30 years. This product features a higher rate of return than money market and savings accounts. Risky Investment Vehicles Unregulated collective investment schemes and land banking are examples of risky solutions. The main problem with UCIS is the lack of diversification. Venture capital trusts are also risky because they invest in start-ups, growing companies, and small businesses. Their stocks are not traded on the major stock exchanges. Other risky instruments include options and futures, microcap stocks, timeshares, cash value life insurance, and others. In general, the higher the risk of loss, the higher the returns offered. The choice of instrument depends on the perception, level, and tolerance for risk.