Safest Investments with (Potentially) High Returns 2024

by bampublishing | May 26, 2022 | BAM Blog, Multifamily Syndication, Real Estate Investing | 0 comments

Preserve Your Capital by Investing in Low Risk Investments

A low risk investment is any asset in your investment portfolio that is inherently “safer” than their counterparts. Bonds, for example, are low risk compared to stocks, while treasury bonds are low risk compared to corporate bond funds. [2]

To identify low risk investments, first we need to discuss what risk is. Risk refers to any level of uncertainty that can have a negative effect on the investment and the investor’s financial welfare.

Some investors have more risk tolerance, meaning they are more comfortable with high risk investments. This may be due to their financial situation or their level of experience when it comes to investing. They may have an emergency fund in place in case their investments don’t pan out. But the average investor has a low risk tolerance and will seek lower risk investments.

No investment is without risk. Make sure to consult your investment advisor before making any financial decisions.

High-Yield Savings Accounts

High yield savings accounts are highly liquid and immune to market fluctuations, making them the safest account type for your money

A high yield savings account is a type of savings account that usually pays 20 to 25 times the national average of standard savings accounts. People have traditionally kept their savings account at the same bank where they hold their checking account. This meant that transfers between the two were quick and easy. However, because of internet-only banks, the competition on savings rates has skyrocketed. This created a new category, which we now call high yield savings accounts. [3]

These bank accounts are Federal Deposit Insurance Corporation (FDIC)-insured.

Investors just need to keep in mind that their money could still lose purchasing power if the inflation is higher than the annual percentage yield (APY). [1]

If an investor is holding $5,000 in savings, for example, and the national average is 0.10 APY, they would return just over $5 over the course of the year. But if they put that same amount in an account that is earning 2 percent, they would earn $100. This means high yield savings account rates offer a significant increase in earnings. [3]

Gold

A lot of investors consider gold to be the ultimate safe investment. Gold can serve as a safe haven for your money because it is protected against inflation over the long term.

Gold, however, may experience drastic price swings over the short term, just like stocks. The difference is that gold is able to hold its value over the long term. This precious metal is also good for diversification. Since it is a monetary asset, you can diversify your portfolio away from dollar-denominated assets. [1]

When it comes to low risk investments, gold is one of the things that can help you achieve financial stability. It is one example of high yield investments that investors should consider.

Certificates of Deposit

Similar to a high yield savings account, certificates of deposit (CDs) can also be one of your low risk investments. It can also help you create a diversified portfolio. Certificates of deposit are perfect for when you don’t need immediate access to your money but you still want to earn more than your traditional savings accounts.

Do keep in mind that CDs lock up your money, which will reduce your liquidity. However, you get to enjoy higher rates. CDs also charge penalties if you withdraw your money early. This usually involves a few months of interest. There are no-penalty certificates of deposit, but they generally offer lower yields. [1]

U.S. Treasury Bonds

Treasury bond funds, also known as T-bond funds, are government debt securities issued by the US Federal government. Treasury bond funds have maturities that exceed 20 years. They earn interest periodically until they mature. At that point, the owner is paid an amount equal to the principal value. [4]

Treasury bond funds are part of the larger category of US sovereign debt called treasuries. These are virtually risk-free because they are supported by the US government’s ability to tax its citizens.

Treasury bonds are among the government-issued securities that are considered virtually risk-free, along with Treasury notes, Treasury bills, and Treasury Inflation Protected Securities (TIPS). [4]

T-bonds can be considered the safest investments in existence. Just how much risk you are exposed to when you invest in treasury bonds is unknown. But because the US government has never defaulted on its debt, these treasuries are considered extremely secure as investment vehicles. [1]

Investors formulating investment strategies should consider T-bonds. The only problem here is that they have generally low yields, which makes them less attractive to investors. But when it comes to inflation protection, you cannot go wrong with treasury bonds.

Series I Savings Bonds

Another investment type with minimal risk involved is Series I Savings bonds. With Series I Savings bonds, investors can fend off inflation while earning interest rates. These are government bond funds whose yield cannot go below zero, unlike TIPS which can sometimes have negative yields. [1]

With Series I Savings bonds, investors can only invest up to $10,000 per year per Social Security number. But I Bonds can earn interest rates for up to 30 years. Keep in mind that you need to hold them for a year before they can be liquidated with the government. You may also forfeit three months of interest if you cash them out before you have held them for at least five years. They are similar to CDs in this way.

Corporate Bonds

Corporate bond funds are a type of debt security issued by firms and sold to investors. Investors are paid a certain number of interest payments while the company gets the capital that it needs. Interest rates may be either fixed or variable. Once the bond reaches maturity or expires, the payments cease. The original investment is then returned to the investor. [5]

Corporate bond funds make safe investments because they are backed by the company’s ability to repay it. In the rare occasion that it becomes necessary, the company’s physical assets may also be used as collateral.

Corporate bond funds help companies raise money or capital. By buying corporate funds, investors are basically lending money to the company. In return, they get a series of interest payments. [1]

Corporate bonds may also trade on the secondary market. Because they are considered somewhat riskier than US government bond funds, corporate bonds tend to have higher interest rates. This is to compensate for the added risk. Not all companies have the same repayment record as the US government itself.

High quality bonds are usually called “Triple-A” bonds. On the other hand, the least creditworthy bonds are called “junk”.

Investors who want to make sure they are making a safe investment should review the rating on bonds. Investment grade corporate bonds have a rating of AAA, AA, and BBB. If you want to prioritize a safe investment, go for these. But if you have a higher risk tolerance and you want even higher yields, go for corporate bonds with a different rating from the ones mentioned above. These have a higher interest rate risk but they can give you a better yield. [1]

Investors can also avoid fees when purchasing corporate bonds by looking for bond mutual funds and bond ETFs that invest in thousands of company bond funds.

Real Estate Investing

Investors who are looking for alternative investments that are safe and can generate passive income should go for real estate investing. Real estate properties may be considered safe investments, depending on the location and other factors.

With real estate, investors can generate consistent income, whether it is a rental property or a commercial building. Unlike stock investments, you can avoid the stock market ups and downs with real estate. [1]

Some investors go for real estate investment trusts (REITs), but these are high risk investments especially in volatile markets.

Real estate can generate consistently high income, especially multifamily properties like apartment buildings and condominiums with plenty of units. Real estate investors should know, however, that this investment type also comes with additional fees like maintenance fees and property taxes that are not necessary for other safe investments.

But if you are looking for safe investments with high returns, real estate is often a good option for it.

Multifamily Syndication

Real estate is a very reliable asset class even during economic uncertainty because people need a place to live. Apartments and other multifamily properties can still generate a consistent cash flow even during a recession.

Multifamily syndication allows investors to put money into real estate without having to worry about maintenance, repairs, tenants, and several other responsibilities associated with being a landlord. It is also a good way to diversify your investment portfolio.

A syndication deal is a real estate deal in which several investors pool their funds together to buy a single property. A sponsor, also known as a syndicator, is responsible for putting the deal together. They will locate the real estate property, secure the loan, and locate passive investors who will provide most of the capital in exchange for equity upon resale and monthly cash flow. [6]

Passive investors will provide the majority of the funds, but they will not have to handle the property once it has been purchased. They don’t need to manage the property because the sponsor is also in charge of it.

A syndication deal is an example of passive investments with high returns. Any real estate property can be used for a syndication deal, but multifamily properties are the most popular for this investment strategy because of their strong cash flow. Multifamily properties also don’t have to worry much about vacancies. Even if one or two units become vacant, the remaining units can still generate income on a monthly basis. [6]

If a real estate property is well-located, those vacant units will be filled very quickly.

Work with BAM Capital for Multifamily Syndication

Multifamily syndication can be one of the best investments with potentially high returns. But you still need to work with a reliable syndicator to make sure this investment goes smoothly.

BAM Capital is the best syndicator for the job. It is an Indianapolis-based syndicator that prioritizes class A+, A-, and B++ properties in the Midwest. BAM Capital locates multifamily assets with in-place cash flow and proven upside potential. [7]

Passive investors love BAM Capital’s approach to multifamily syndication. BAM Capital strives to mitigate investor risk while also creating forced appreciation that yields a higher return.

BAM Capital negotiates the purchasing and financing on your behalf. They take care of everything from start to finish, using their unmatched real estate expertise and transparency.

BAM Capital has a consistent track record that makes them very popular among passive investors. In fact, they currently have over $700M AUM and 5,000+ units. Schedule a call with BAM Capital and invest today.