Best 10 Safe Investments To Make Money Fast In January 2023

Best 10 safe investments to make money fast in January 2023

Best 10 Safe Investments To Make Money Fast In January 2023

Since high inflation is hurting the economy, the Federal Reserve has started to raise interest rates. In the coming months, investors should be ready for a tough ride, so they need to stay on track. Building a portfolio with at least some less risky assets can help you get through times when the market is volatile.

The trade-off is that investors are likely to get less money in the long run if they take less risk. That might be fine if your goal is keeping your money safe and getting interest income.

But if you want your money to grow, think about ways to invest that match your long-term goals. Even investments with more risk, like stocks, have parts, like dividend stocks, that reduce risk while still giving good long-term returns.

What to think about

A few things that may occur, depending on how much risk you are willing to take are:

  • You won’t lose any of your principal, so there’s no risk.
  • Some risk—likely It’s that, over time, you’ll either break even or lose a small amount.

There are, however, two problems: low-risk investments have lower returns than investments with more risk, and inflation can make money in low-risk investments less valuable.

If you only choose low-risk investments, your buying power will likely decrease over time. This is also why low-risk investments are better for short-term or emergency funds. On the other hand, investments with more risk tend to give better long-term returns.

Here are January 2023’s best investments

1. Savings accounts

Even though savings accounts aren’t investments, they give you a small profit. You may look for highest return options on the internet, and if you’re willing to look at the rate tables and shop around, you can get a bit more yield.

A savings account is a safe way to keep your money because you can’t lose it. The government ensures most funds by up to $250,000 per account type per bank, you’ll still get your money back, if the bank runs out of business.

Cash doesn’t lose value, but inflation can make it less valuable.

2. Savings bonds

Savings bonds are a low-risk investment that changes to keep up with inflation. When inflation goes up, the interest rate on a bond goes up. But when inflation goes down, so does the payment on the bond. 

McKayla Braden, a former senior advisor for the Department of the Treasury, says that bonds are a safe escape from inflation because you get a fixed rate and an inflation rate every six months. This is called an inflation premium, and it changes twice a year.

Why invest? The payment on a Series I bond changes every six months based on the inflation rate. Because inflation is high, the bond pays out a significant yield. That will go up if inflation keeps going up as well. So the bond protects your investment from the damage that rising prices can cause.

The U.S. government backs Savings bonds, which makes them one of the safest investments you can make. But don’t forget that the interest payment on the bond will go down if and when inflation goes back to normal.

If you cash in a U.S. savings bond before five years, you have to pay a penalty of the interest.

3. Certificates of deposit with a short term

Bank CDs in an FDIC-backed account can never lose money unless you take the money out early. To find the best rates, you should compare what different banks offer online. In 2023, interest rates are already going up, so it might make sense to buy short-term CDs and then reinvest as rates go up. You won’t want to be stuck with CDs that aren’t worth much for too long.

A no-penalty CD is an alternative to a short-term CD. With this type of CD, you can avoid the usual penalty for withdrawing your money early. So you can get your cash out and put it into a CD that pays more without having to pay the standard fees.

If you keep the CD together until the end of the term, the bank promises to pay you interest. Some savings accounts have higher interest rates as compared to some certificates of deposit (CDs), but these so-called “high-yield” accounts may need a significant deposit.

Risk: If you take money out of a CD before the maturity date, you will usually lose some of the interest you earned. Some banks will also take a portion of your principal, so it’s essential to read the rules and check CD rates before you invest. Also, if you lock yourself into a CD with a longer term and overall rates go up, you’ll earn less. You’ll need to cancel the CD to get a market rate, which will usually cost you a fee.

4. Money market funds

Brokerage firms and mutual fund companies usually sell money market funds. They are pools of CDs, short-term bonds, and other low-risk investments that are put together to spread out risk.

Why invest? Unlike a certificate of deposit (CD), a money market fund is liquid, which means you can usually get your money out at any time without being charged.

Ben Wacek, who started and runs Guide Financial Planning in Minneapolis and is a financial planner, says that money market funds are usually pretty safe.

“The bank tells you the rate you’ll get, and its goal is that the value per share won’t be less than $1,” he says.

5. Bills, notes, bonds, and TIPS from the Treasury

The U.S. Treasury also makes Treasury bills, Treasury notes, Treasury bonds, and Treasury inflation-protected securities, or TIPS:

  • Treasury bills have to be paid off in one year or less.
  • Treasury notes can be held for as long as ten years.
  • Treasury bonds can be paid off in up to 30 years.

TIPS is a type of security whose principal value goes up or down with inflation.

Why should you invest? You can buy and sell these very liquid investments directly or through mutual funds.

Risk: Most of the time, you won’t lose money if you hold on to Treasurys until they mature unless you buy a bond with a negative yield. If you sell them before they grow, you could lose some of your principal because the interest rates fluctuate the values with them. When interest rates go up, bonds lose weight, and when they go down, interest rates go up.

6. Bonds from a company

Companies also make bonds, ranging from those with low risk (like those made by big, profitable companies) to ones with a lot of trouble. High-yield bonds, also called “junk bonds,” are the worst kind of bonds.

Cheryl Krueger, who started Growing Fortunes Financial Partners in Schaumburg, Illinois, says, “There are high-yield corporate bonds with low rates and low quality.” “I think those are riskier because you don’t have to worry about the interest rate risk, but also the default risk.”

Changes in interest rates can cause changes in the market value of a bond. When interest rates go down, bond values go up, and when rates go up, bond values go down.

The default risk is that the company might not pay the interest and principal as promised, leaving you with nothing from your investment.

Why should you invest? Investors can choose bonds that will be paid off in the next few years to reduce the risk of rising interest rates. Changes in interest rates are felt more by bonds with longer terms. Investors can lower their risk of default by buying high-quality bonds from large, reputable companies or by buying funds that invest in a diverse portfolio of these bonds.

Risk: Generally, bonds are thought to have less risk than stocks, but neither is risk-free.

“Bondholders are more important than stockholders,” says Wacek. If a company goes bankrupt, bondholders will get their money back before stockholders.

7. Dividend-paying stocks

Stocks aren’t as safe as cash, savings accounts, or government debt, but they’re usually less risky than high-fliers like options or futures. Dividend stocks are considered safer than high-growth ones because they pay cash dividends. This helps reduce the volatility of dividend stocks but doesn’t get rid of it completely. So dividend stocks will go up and down with the market, but they might not drop as much when it is down.

Why invest? Most people think stocks that pay dividends are less risky than those that don’t.

Wacek says, “I wouldn’t say that a dividend-paying stock is a low-risk investment because some dividend-paying stocks lost 20% or 30% in 2008.” “But it has less risk than a growth stock in general.”

That’s because companies that pay dividends tend to be more stable and mature, offering both tips and the chance that the stock price will go up. Wacek says, “You don’t just depend on the value of that stock, which can change, because that stock also pays you a regular income.”

Risk: One thing that could go wrong with dividend stocks is if the company runs into hard times and declares a loss. This could force the company to cut or eliminate its dividend, hurting the stock price.

8. Favored stocks

Common stocks are more like high-quality bonds than preferred stocks. Still, their values can change significantly if the stock market goes down or interest rates go up.

Why should you invest? Preferred stock pays out cash regularly, just like a bond. But, in rare cases, companies that issue preferred stock may be able to stop paying dividends, though the company usually has to make up any missed payments. And the company has to give dividends to holders of preferred stock before it can give tips to holders of common stock.

Risk: Preferred stock is like a bond with more chances, but it is usually safer than a stock. They are often called “hybrid securities” because those who own preferred stock get paid after bondholders but before stockholders. Preferred stocks are usually traded on a stock exchange like other stocks, and they must be carefully examined before being bought.

9. Accounts on the money market

A money market account may feel like a savings account, and it has many of the same benefits, like a debit card and interest payments. The minimum deposit for a money market account may be higher than for a savings account.

Why invest? savings accounts tend to have lower interest rates than similar money market accounts. You’ll also be able to spend the money if you need to, though, like a savings account, the money market account may limit how much you can take out each month. You’ll want to look for the best rates to ensure you get the most out of your money.

Risk: The FDIC protects money market accounts up to $250,000 per depositor and bank. So there is no risk to your money in a money market account. Not earning enough interest on your money in the bank to keep up with inflation could be the most significant risk. This means that your purchasing power could go down over time.

10. Annuities that don’t change

An annuity refers to a contract that is typically made with an insurance company that promises to pay a certain amount of money over a certain amount of time in exchange for a lump sum. The annuity can be set up in many different ways, such as to pay for a set amount of time, like 20 years, or until the client dies.

With a fixed annuity, the contract says that a certain amount of money will be paid over time, usually once a month. You can put in a lump sum and start getting payments immediately, or you can put in money over time and start getting amounts later (such as your retirement date.)

Why spend: A fixed annuity can give you a guaranteed income and return, which provides you with more financial security, especially if you don’t work anymore. A grant can also help you grow your revenue without having to pay taxes on it right away. You can put preferable amount of money into the account. Depending on the contract, annuities can also come with several other benefits, such as death or a minimum amount of money that is always paid out.

Risk: Annuity contracts are hard to understand, so you might not get exactly what you want if you don’t read the fine print. Annuities aren’t very liquid, which means it can be hard or even impossible to get out of one without paying a hefty fee. If inflation increases a lot in the future, your guaranteed payout might not seem as good.