Investing: Risks, Rewards, And Your Safety Net

Investing is a great way to grow your money, but it's important to remember that it's not without risk. Safer assets typically offer lower returns in exchange for safety, so it's important to understand the balance between returns and risk when comparing investments. Investors choose safe investments when they want to protect their capital. U.S. Treasury securities are considered to be one of the safest investments on earth, as they are backed by the full faith and credit of the U.S. government.

Safe investments vs. riskier assets

Safe investments are those that protect your capital, but they typically have lower returns than riskier assets. For example, US Treasury securities are considered to be one of the safest investments in the world because they are backed by the US government. They offer fixed terms and fixed interest rates.

High-yield savings accounts are also considered a safe investment, offering strong returns given the total absence of risk.

Safer assets typically offer lower expected returns in exchange for safety. Experts recommend maintaining a diversified portfolio that includes a mix of low-, moderate-, and higher-risk investments. This can ensure you're able to ride out rough patches or generate needed income in older age.

Some higher-risk assets allow for growth potential, while maintaining a core of stable investments hedges against volatility.

Diversified portfolios

Safer assets usually offer lower returns, but this is a trade-off for safety. For example, a high-yield savings account is considered a safe investment because it offers strong returns with no risk.

U.S. Treasury securities are considered to be one of the safest investments in the world. This is because they are backed by the full faith and credit of the U.S. government. They also offer fixed terms and fixed interest rates.

Some higher-risk assets allow for growth potential, while maintaining a core of stable investments hedges against volatility. A safety net of some low-risk investments can ensure you'll be able to ride out rough patches or generate needed income in older age.

Low-risk investments

Safer assets typically offer lower expected returns in exchange for safety. Investors choose safe investments when they want to protect their capital. Experts recommend maintaining a diversified portfolio that includes a mix of low-, moderate-, and higher-risk investments.

Cash and on-demand cash deposits are the epitome of safety in the asset world. A high-yield savings account is pretty much the gold standard of safe investments, offering strong returns given the total absence of risk.

U.S. Treasury securities are considered to be about the safest investments on earth. That’s because they are backed by the full faith and credit of the U.S. government. Government bonds offer fixed terms and fixed interest rates. Treasury bills, commonly known as T-bills, have maturities of four, eight, 13, 26 and 52 weeks. Treasury notes come in maturities of two and 10 years. Treasury bonds have maturities of 20 to 30 years. The market for Treasury bills, notes and bonds is larger and more liquid than any other. That means you won’t have any trouble selling Treasury securities if you need to cash out before they reach their full maturity date.

While cash isn't officially on the list, it should be considered so you have a baseline to compare other investments.

High-yield savings accounts

Safer investments typically offer lower returns than their riskier counterparts. Investors choose safe investments when they want to protect their capital. Experts recommend maintaining a diversified portfolio that includes a mix of low-, moderate-, and higher-risk investments.

U.S. Treasury securities are also considered to be one of the safest investments on earth. They are backed by the full faith and credit of the U.S. government. Government bonds offer fixed terms and fixed interest rates. Treasury bills, commonly known as T-bills, have maturities of four, eight, 13, 26 and 52 weeks. Treasury notes come in maturities of two and 10 years. Treasury bonds have maturities of 20 to 30 years. The market for Treasury bills, notes and bonds is larger and more liquid than any other. This means that investors won't have any trouble selling Treasury securities if they need to cash out before they reach their full maturity date.

U.S. Treasury securities

Safer assets typically offer lower expected returns in exchange for safety. Investors choose safe investments when they want to protect their capital. Experts recommend maintaining a diversified portfolio that includes a mix of low-, moderate-, and higher-risk investments.

Treasury bills, commonly known as T-bills, have maturities of four, eight, 13, 26 and 52 weeks. Treasury notes come in maturities of two and 10 years. Treasury bonds have maturities of 20 to 30 years. The market for Treasury bills, notes and bonds is larger and more liquid than any other. That means you won’t have any trouble selling Treasury securities if you need to cash out before they reach their full maturity date.

Treasury bills are sold by single-price auctions held weekly. Offering amounts for 13-week and 26-week bills are announced each Thursday for auction on the following Monday and settlement, or issuance, on Thursday. In 1929, the US Treasury shifted from the fixed-price subscription system to a system of auctioning where Treasury bills would be sold to the highest bidder.

Frequently asked questions