The cost of living is continually rising and today’s job market is precarious. These two factors make it quite imperative that we create an investment portfolio.
However, we don’t want to leave our investment choices to chance.
The way to do this is by putting our money into investments that generate decent returns but have an insignificant risk.
But one should always keep in mind that all investments hold some risk, depending on known and unknown aspects.
Additionally, a majority of low-risk investments are low-return as well, while higher-risk investments reward you with higher profits. So finding that perfect low-risk, high-yield investment can be challenging.
1. Save Money In One or More High-Interest Savings Accounts
For those looking for the lowest risk investment strategy but with a decent yield, then a high-interest or high-yield savings account could be the perfect answer.
By holding such a bank account, you will be able to earn a nominal amount of interest.
The best thing about this arrangement is that you’re not giving your money to some investment firm with no real knowledge of where it is or if it’s safe.
With a high-yield savings account, you will have moderate to full control over the funds.
However, there is a federal law called “Regulation D” that limits you to six transactions per month.
If you go over that limit, the bank has the authority to either charge you a fee, change your account to a checkings account, or completely close it.
The federal government enacted this regulation so that banks will always have the proper amount of reserve cash if they need it, as well as force account holders to utilize their savings accounts for their intended purpose: to save money.
As a general standard, most big banks offer around 2.3 percent or so on money saved in a savings account.
While a lot of these banks require only $100 as your first deposit, other banks such as Citizens Access require $5,000 and PurePoint Financial need $10,000.
2. Dividend Paying Stocks and Exchange-Traded Funds (ETFs)
Another way to get the most out of your investment portfolio is also a tried and true investment strategy: stock investment. But not all stocks are created equal.
For example, you could have two stocks that perform identically over time, but one doesn’t pay out dividends while the other pays three or four percent in profits annually.
It goes without saying that the second stock is the best choice.
Of course, like any investment, picking the right stocks to buy isn’t easy and comes with a certain amount of risk, such as one of the companies you own shares in going belly up.
If you join a DIY investment site like E-Trade, you will find investment tools that can help you make a good choice.
3. Viatical Settlement Investment
Viatical settlements are a fairly new investment strategy in the world of retail investment.
Once something reserved for large investment firms and wealthy investors, viatical settlement investments are gaining in popularity among consumers.
According to Alan H. Buerger, executive chairman and co-founder of Coventry, the firm is “seeing organic growth of this market through the education of consumers and their professional advisors of the life settlement option.”
So, what exactly are viatical settlements and why are they on this list?
When someone who is chronically or terminally ill and facing less than two years before they pass, they may decide to sell their life insurance policy to a third party.
Most often than not, the third party is an investment company that specializes in such transactions.
These investors will pay the insured the “cash surrender value” of the policy but always less than its “face value.”
Further, the investor usually agrees to pay the remaining premiums for the insured until they pass.
It’s also important not to confuse a viatical settlement with a life settlement since a life settlement only involves those 65 years of age or older, or who have severe medical conditions (which aren’t the same as being terminally ill).
This sort of investment is considered low risk, high yielding because those who purchase viatical settlements closely evaluate each case.
If the investor ends up paying the premiums for a more extended period than anticipated, profits will decrease or be a total loss.
It’s also good to note that this idea of one selling their life insurance policy to a third party has been around for over 100 years.
In the early 20th century, a John C. Burchard sold his life insurance policy to his doctor, A. H. Grigsby.
When Burchard passed away, a legal case ensued and it led to Grigsby v. Russell, 222 U.S. 149 (1911), where the Supreme Court ruled in favor of Grigsby.