6 High-Reward & Risk-Free Investment Strategies

Different types of investment strategies yield different levels of return depending on the risk of that particular investment. There are some low-risk options you can invest in to get a reasonable profit. Most of these investments tend to yield very low returns.

For instance, a 10-year U.S. Treasuries pay a dismal 2% while 30-year treasuries only pay 2.5%. These returns are meagre and slow. There are however better ways in which you can invest and yield returns of upwards of 6% and still maintain low or minimum risk on your investment. Here are six high-reward, risk-free investment strategies you should give a try.

1. Dividend Paying Stocks

Some companies pay out generous dividends, which are mostly higher than what you get in risk-free investments. Some of these companies have been around for a long time. They have acquired the kind of market stability that allows them to pay out a good stable dividend to stockholders regularly, even when the market fluctuates. Dividend-paying stocks are however not entirely risk-free since stock market fluctuations can hit some companies hard, affecting dividend payouts.

2. Preferred Stocks

Preferred stocks as suggested in the name are stocks that have the advantage of bonds and are higher up in the capital stake than equity. The dividends payouts are also higher than those for common stocks. They have numerous benefits compared to common stocks.

When it comes to payouts, after all the creditors are paid, preferred stockholders are the next in line, ahead of the common stockholders. The same preferential treatment is exercised when a company wants to reduce its dividend payouts. Common stocks are first to be slashed. Preferred stocks are more predictable and offer a significant ROI with a minimum amount of risk.

3. P2P Lending

Peer-to-Peer, or more commonly known as P2P, lending is a popular risk free investment strategy. This is because it attracts extremely low-interest rates. Online lending platforms are used to link people in need of a loan with investors at a set interest rate and loan term.

These loans can be used for various purposes, some which may not be approved by traditional lenders such as banks. An investor puts in his money in the P2P lending platform. They have the freedom to choose the criteria and the profile of the type of person they are willing to loan funds to. Such criteria may include a minimum credit score, among other requirements.

4. Real Estate Investment Trusts

Commonly known as REITs, these are funds invested in commercial real estate properties such as retail shopping malls, office blocks and large-scale apartment projects. A REIT can be part of a project, either as an Equity REIT, Mortgage REIT or as a Hybrid REIT, which is a combination of the two.

With real estate being an appreciating asset, REITs are some of the few investment options that attract high returns at the lowest possible risk. REITs can be invested in a single or multiple properties, a factor that increases the return on investment since some locations and cities have stronger real estate markets than others. With REITs, you have a stronger measure of liquidity compared to just investing in real estate.

REITs are also flexible investment options that don’t tie down the investment to a single property. With REITs, you receive special tax treatment compared to other investment options, making them excellent risk free investments with high dividends.

5. Credit Card Rewards

These are some of the easiest low-risk investment strategies out there, especially for frequent credit card users. With continued use, you can get close to or even higher than 5% returns and rewards by just using your credit card to shop for stuff you usually buy. However, you can only enjoy the benefits of credit card rewards when you pay your credit card bills promptly and regularly.

If you accrue a large credit debt, you won’t feel the impact of the reward since it will go into paying the debt. It is most useful for people who use their credit cards the way they use debit cards or a checking account.

6. Annuities

Annuities are often shunned mainly due to the high fees they are associated with, and also because of the excessive hype surrounding them. However, with the right advisor, they can be a great low risk, highly worthwhile investments. The return from annuities can either be set and fixed or set to vary over time, hence the different types. They are variously categorized as fixed and variable annuities. The higher the return on an annuity, the higher the risk. Nonetheless, annuities yield higher than usual returns at a significantly lower risk compared to other investment options.

Finding the best low-risk investment can be challenging and daunting, but with the right advise, you could be smiling your way to the bank each time dividends are released.