Best Low Risk Investments

1. Certificates of Deposit

There is nothing more boring than a certificate of deposit. You can get it through your bank, your credit union or even your investment broker.
With a certificate of deposit (CD) you trade depositing your money for a specific length of time to a financial institution.

In return, you get a set interest rate for that period and it does not change, no matter what happens to interest rates. You are locked in until maturity of the term length. You can withdraw from the CD early for a penalty that is usually equal to three months’ worth of interest.

Why are CDs at the top of our best low risk investment list? Because as long as you get a certificate of deposit with an FDIC-insured financial institution, you are guaranteed to get your principal back as long as your total deposits with that lender are less than $250,000. The government guarantees that you cannot have a loss, and the financial institution gives you interest on top of that.

How much interest you earn is dependent on the length of the CD term and interest rates in the economy. Interest rates are low, but if you lock in your money for many years you can get a little bit more interest.

2. Treasury Inflation Protected Securities (TIPS)

The U.S. Treasury has several types of bond investments for you to choose from. One of the lowest risk is called a Treasury Inflation Protection Security or TIPS. These bonds come with two methods of growth.

The first is a fixed interest rate that doesn’t change for the length of the bond. The second is built-in inflation protection that is guaranteed by the government. Whatever rate inflation grows during the time you hold the TIPS, your investment’s value rises with that rate.

For example, say you invest in a TIPS today that only comes with a 0.35% interest rate. That’s less than certificate of deposit rates and even basic online savings accounts. This isn’t very enticing until you realize that, if inflation grows a 2% per year for the length of the bond, then your investment value increases with that inflation, and gives you a much higher return on your investment.

TIPS can be purchased individually or you can invest in a mutual fund that owns in a basket of TIPS. The latter option makes managing your investments easier, while the former gives you the ability to pick and choose with specific TIPS you want.

3. Money Market Funds

A money market fund is a mutual fund with the main purpose of not losing any value of your investment. The fund also tries to pay out a little bit of interest as well to make parking your cash with the fund worthwhile. The fund’s goal is to maintain a net asset value (NAV) of $1 per share.

These funds aren’t foolproof, but do come with a strong pedigree in protecting the underlying value of your cash. It is possible for the NAV to drop below $1, but it is rare. The interest income is tiny, but your money is relatively secure.

4. Municipal Bonds

When a state or local government needs to borrow money, it doesn’t use a credit card. Instead, the government entity issues a municipal bond. These bonds, also known as munis, are except from federal income tax at the very least. Most states and local municipalities also exempt income tax on munis for issuers in the state, but talk to your accountant before making any decisions.

What makes municipal bonds so safe? Not only do you avoid income tax (which means a higher return compared to an equally risky investment that is taxed) but the likelihood of the borrower defaulting is very low. There have been some enormous municipality bankruptcies in recent years, but these are very rare. Governments can always raise taxes or issue new debt to pay off old debt, which makes holding a municipal bond a pretty safe bet.

5. U.S. Savings Bonds

These are similar to TIPS because they are also backed by the federal government. The likelihood of default on this debt is microscopic, which makes them a very stable investment. There are two main types of US Savings Bonds: Series I and Series EE.

Series I bonds consist of two components: a fixed interest rate return and an adjustable inflation-linked return, making them somewhat similar to TIPS. The fixed rate never changes, but the inflation return rate is adjusted every six months and can also be negative (which of course brings your total return down).

Series EE bonds just have a fixed rate of interest that is added to the bond automatically at the end of each months, so you don’t have to worry about reinvesting for compounding purposes. Rates are very low right now, but there is an interesting facet to EE bonds: the Treasury guarantees the bond will double in value if held to maturity, which is 20 years.

If you don’t hold to maturity you only get the stated interest rate of the bond minus any early withdrawal fees. Another bonus to look into: If you use EE bonds to pay for education, you might be able to exclude some or all of the interest earned from your taxes.

Looking to purchase some Series I or Series EE Bonds? You can do that directly through TreasuryDirect.gov.

6. Annuities

Annuities have a bad reputation with some investors because shady financial advisors over-promoted them to individuals where the annuity wasn’t the right product for their financial goals. Annuities don’t have to be scary things; they can help stabilize your portfolio over a long period.

But talk with a good financial advisor first: Annuities are very complex financial instruments with lots of catches built into the contract.

There are several types of annuities. But in all cases, when you purchase an annuity you make a trade with an insurance company. They take a lump sum of cash from you. In return they give you a stated rate of guaranteed return. Sometimes that return is fixed (with a fixed annuity), sometimes that return is variable (with a variable annuity) and sometimes your return is dictated in part by how the stock market does with guaranteed basic level that gives you downside protection (with an equity indexed annuity).

If you get a guaranteed return, your risk is a lot lower. Unlike the backing of the federal government, the insurance company backs your annuity (and perhaps another company that further insurers the annuity company). Nonetheless, your money is typically going to be very safe in these complicated products.

7. Cash Value Life Insurance

Another controversial investment is cash value life insurance. First, this insurance pays out a death benefit to your beneficiaries when you die; a term life insurance policy gives you this. Other types, known as cash value policies, do that and also build up an investment account from your payments. Whole life insurance and universal life insurance are the chief cash value offerings.

While term life insurance is by far a cheaper option, it only covers your death. One of the best perks of cash value life is you can borrow against the accrued investment value throughout your life, but isn’t hit with income tax. It is a clever way to pass some value onto your heirs without either side getting hit with income tax.

Safe Driving Tips for Back to School

1.    Slow down and obey all traffic laws and speed limits, both in school zones and in neighborhoods surrounding the school.

2.    Comply with local school drop-off and pick-up procedures for the safety of all children accessing the school.

3.    Avoid double parking or stopping on crosswalks to let children out of the car. Double parking will block visibility for other children and other motorists. Visibility is further reduced during the rain and fog seasons when condensation forms on car windows.

4.    Avoid loading or unloading children at locations across the street from the school. This forces youngsters to unnecessarily cross busy streets—often mid-block rather than at a crosswalk.

5.    Prepare to stop for a school bus when overhead yellow lights are flashing. Drive with caution when you see yellow hazard warning lights are flashing on a moving or stopped bus.

6.    Stop for a school bus with its red overhead lights flashing, regardless of the direction from which the driver is approaching. Drivers must not proceed until the school bus resumes motion and the red lights stop flashing, or until signaled by the school bus driver to proceed.

7.    Watch for children walking or bicycling (both on the road and the sidewalk) in areas near a school.

8.    Watch for children playing and gathering near bus stops. Watch for children arriving late for the bus, who may dart into the street without looking for traffic.

9.    Watch for children walking or biking to school when backing up (out of a driveway or leaving a garage).

9 Ways to Prepare Your Child for Back to School

1. Re-Establish School Routines

Use the last few weeks of summer to get into a school-day rhythm. "Have your child practice getting up and getting dressed at the same time every morning," suggests school psychologist Kelly Vaillancourt, MA, CAS. Start eating breakfast, lunch, and snacks around the times your child will eat when school is in session.
It’s also important to get your child used to leaving the house in the morning, so plan morning activities outside the house in the week or two before school.

2. Nurture Independence

Once the classroom door shuts, your child will need to manage a lot of things on his own. Get him ready for independence by talking ahead of time about responsibilities he's old enough to shoulder. Even if your child is young, you can instill skills that will build confidence and independence at school. Have your young child practice writing her name and tying her own shoes.

3. Create a Launch Pad

At home, you can designate a spot where school things like backpacks and lunch boxes always go to avoid last-minute scrambles in the morning. You might also have your child make a list of things to bring to school and post it by the front door.

4. Set Up a Time and Place for Homework

Head off daily battles by making homework part of your child’s everyday routine. Establish a time and a place for studying at home.  As much as possible, plan to make yourself available during homework time, especially with younger kids.

5. After-School Plans

School gets out before most working parents get home, so it's important to figure out where your children will go, or who will be at home, in the afternoons. You might find an after-school program through the school itself, a local YMCA, or a Boys and Girls Club. If possible, try to arrange your schedule so you can be there when your child gets home during those first few days of school. It may help your child adjust to the new schedule and teachers. 

6. Make a Sick-Day Game Plan

Working parents also know the trials and tribulations of getting a call from the school nurse when they can’t get away from the office.  Before school begins, line up a trusted babysitter or group of parents that can pinch hit for each other when children get sick. And make sure you know the school’s policy. You may have to sign forms ahead of time listing people who have your permission to pick up your child.

 

7. Attend Orientations to Meet and Greet

Schools typically hold orientation and information sessions before the start of each academic year. These are good opportunities for you to meet the key players: your child’s teachers, school counselors, the principal, and most importantly, front desk staff.

8. Talk to the Teachers

Of course, teachers are the reason your child is there. When you talk to your child’s teachers, ask about their approach to homework. Some teachers assign homework so kids can practice new skills while others focus on the accuracy of the assignments they turn in. Ask for the dates of tests and large assignments so you can help your child plan accordingly.

9. Make it a Family Affair

Together, you and your child can plan for success in school. For instance, sit down with your child to create a routine chart. Ask your child what she wants to do first when she first gets home from school: play outside or do homework? Her answers go on the chart.