Low-risk investments with high returns: what every saver should know

When it comes to investing, it is important to be aware that all investments naturally involve a trade-off between risk and potential returns. In general, assets with higher return potential will usually come with greater risks, while low-risk investments provide modest but stable returns.

In terms of low-risk investments, those with FDIC or NCUA insurance, U.S. government backing, and high credit quality are generally considered “safe,” but it is still important to inform yourself of potential risks.

Although low-risk investments can help you mitigate potential losses, experts still recommend maintaining a diversified portfolio with a mix of different types of assets. Tailoring your asset allocation can help you meet your financial goals, investment horizon, and risk tolerance to ensure you have a well-rounded portfolio.

When determining what to invest in, it’s important to remember that the “best” investment for one person might not be the same for another. The best choice depends on your unique situation. 

While it may be hard to find low-risk investment options with high returns, here are some options you may consider:

While not your typical stock market investment, high-yield savings accounts still offer a modest return on your money. High-yield savings accounts often offer higher interest rates than traditional savings accounts, with APYs exceeding 4% in 2025.¹ Some online banks and other financial institutions may offer even higher rates. However, interest rates are often variable, meaning they can fluctuate with market conditions or inflation.

High-yield savings accounts are a great option to help grow your savings faster while maintaining liquidity. You can also consider this option for starting an emergency fund or savings towards short-term goals.

A high yield-savings account is generally considered a low-risk investment as you won’t necessarily lose money, but it is important to note that inflation can erode that money’s purchasing power. However, if you open an individual deposit account at a bank that provides FDIC insurance, your deposit is insured up to $250,000 by the FDIC in the unlikely event that the bank fails. Therefore, you won’t have to worry about potentially losing funds like you may with stock investments.

Certificates of deposit offer fixed interest rates over a predetermined period, ranging from a few months to over five years. However, the catch is you agree to leave your money untouched throughout the term, as withdrawing before the CD matures can lead to a penalty fee. This is considered a low-risk investment because fixed rates can help you better estimate your returns, and if opened at an FDIC-insured bank or NCUA-insured credit union, your money is protected up to $250,000 per depositor.

Different CD options, like no-penalty CDs, can give you more flexibility if you think you may need to access your funds before the maturity date. As the name implies, a no-penalty CD typically allows for a withdrawal from the CD prior to maturity without paying a penalty fee.

A CD can be best for storing money you will need at a fixed date in the future (e.g., a down payment on a home or car). So if you are trying to grow your money safely for a predetermined amount of time, this might be a good option. While you can lock in higher yields (typically also greater than high-yield interest accounts), you may want to ensure you won’t need that money sooner than your maturity date to avoid extra fees.

The Raisin marketplace offers access to both fixed-term and no-penalty CDs with competitive interest rates to help boost your savings potential. Compare account rates and start saving today.

Although the names may sound similar, money market accounts and money market funds are actually two distinct investments.

Money market accounts (MMAs) are not a traditional market investment, but rather a type of bank deposit account that earns interest, often at rates higher than traditional savings accounts. They may sometimes come with limited check-writing or debit access, and while there is no longer a federal six-per-month limit on monthly transactions, banks may still impose limits. If made at an FDIC- or NCUA-insured institution, your money is insured up to $250,000 per depositor, per insured institution, per ownership category, making it a safer investment option.

Money market funds (MMFs) are investment products that pool money into short-term, high-quality debt securities (like U.S. Treasuries or CDs). MMFs are not FDIC insured and may have liquidity fees.

Both are considered low-risk investments because MMAs are usually protected up to the legal limit with FDIC insurance, and MMFs invest in highly stable, short-term instruments that are designed to preserve capital and maintain a steady share value, making them less volatile than stocks or long-term bonds. Both options also have relatively flexible liquidity, but MMAs may have a monthly transaction limit.

U.S. Treasury securities — including Treasury bills (T-bills), notes, and bonds — are loans you give the U.S. government in exchange for regular fixed-interest payments and the return of your principal at maturity. The interest on Treasury bills is exempt from state and local tax, but is federally taxable. The length of maturity depends on the type of Treasury, but may range from less than one year to over 30 years.

Treasury Inflation-Protected Securities, or TIPS, are a type of Treasury security designed to protect your investment from inflation, aiming to protect your purchasing power during inflationary periods. TIPS work similarly to Treasuries, but since the principal value adjusts with the consumer price index (CPI) and fluctuates with inflation, interest on payments can also vary. Note that TIPS principal adjustments are federally taxable each year if held in a taxable account.

Both of these investment types are backed by the U.S. government, which is why investors may consider them safe, low-risk investments. They can also foster predictable income, potentially hedge against inflation, and come with tax benefits, making them more appealing to investors.

Series I bonds are a Treasury-issued savings vehicle similar to a Treasury bill, but they combine a fixed interest and variable inflation rate. These bonds are sometimes seen as the lowest-risk investments available, as they are backed by the full faith and credit of the U.S. government. Therefore, you can ensure your principal is risk-free.

Series I bonds also offer some tax benefits, making them an attractive, lower-risk investment option.

Stable value funds are considered a more conservative investment option and are typically offered through employer-sponsored retirement plans (such as a 401(k) or 403(b)) or certain pension plans as a portfolio of bonds. They are designed to offer capital preservation and steady returns (similar to money market funds) but offer the potential for slightly higher returns.

Stable value funds invest in high-quality corporate and government bonds with short and intermediate terms. While they are similar to any other bond fund, stable value funds are insured by wrap contracts from insurance companies or banks, which guarantee principal and interest at book value, offering a unique benefit to investors. They are not FDIC insured, but rather rely on insurer strength, fund diversification, and retirement plan oversight for more stability.

Historical returns have shown low volatility, with yields slightly higher than money market funds. These funds allow investors to invest in low-risk options to help grow their retirement savings.

Blue-chip stocks are shares of large, financially sound companies with a long-standing history of consistent performance and strong reputations. Due to their size, financial strength, and consistent dividends, blue-chip stocks may be considered lower-risk investments than smaller, less established companies. Keep in mind that dividends are not guaranteed and, even with a strong reputation, there remains a risk of loss.

Exchange-traded funds, or ETFs, are baskets of securities that track the performance of a specific index, commodity, bond, or group of assets. ETFs provide a cost-effective way for investing in entire market sectors through one single security and allow for portfolio diversification. ETFs can be traded on the stock market like normal stocks and can be used to invest in popular indices like the S&P 500.

While these options are not 100% risk-free, it may be possible to find options with lower volatility compared to growth stocks and historical returns make them a lower-risk option that provides diversification. However, it is also important to remember that past performance does not guarantee future results, and you can still face possible losses.

While there is no one-size-fits-all method when choosing a low-risk investment, the best choice will be the one that most closely aligns with your financial goals and needs. It is important to analyze your current financial situation, assess your risk tolerance, and clearly define your goals to help you make the best decision. 

Here are some things to keep in mind when choosing the right option:

• Assess your investment timeline: Determine your short-term vs. multi-year goals. You might benefit from CDs, MMAs, or high-yield savings accounts when saving towards short-term goals, or you may want to consider ETFs, Series I bonds, or Treasuries for longer-term goals.

• Balance liquidity needs, penalties, and yield: Consider how much liquidity you need to maintain, as well as penalties you may face when accessing your funds. Higher yields may mean reduced liquidity.

• Consider inflation risk and tax status of returns: You might want to consider if your yield is high enough to combat inflation and maintain purchasing power. You will also want to be aware of tax liabilities on returns or possible tax exemptions.

• Use laddering strategies: Laddering strategies (e.g., CD and Treasury ladders) can help you to optimize flexibility and maintain some liquidity when stretching the length of your investment goals.

• Match instruments to goals: Ensure your investments are in alignment with your needs. For example, building an emergency cushion, medium-term savings, or inflation hedge.

While truly safe investments with high returns are virtually nonexistent, finding low-risk alternatives with relatively stable returns can still help savers prioritize stability to reach their financial goals. It is important to assess your personal goals, risk tolerance, and liquidity needs when choosing what to invest in and to combine several low-risk strategies for portfolio strength.

Getting started with low-risk investments doesn’t have to be challenging. The Raisin marketplace gives you access to a variety of high-yield savings products with competitive interest rates to help maximize your saving potential. Compare rates and account types, sign up, and get started building your wealth today!

I bonds and TIPS are both investments backed by the U.S. government that protect against inflation but work differently. I bonds combine fixed interest rates with an inflation-adjusted rate that changes every six months, with interest compounding over time. TIPS, on the other hand, pay interest twice a year based on a fixed rate, but the principal value adjusts with inflation (or deflation), which can affect interest payments.

While both investment types are designed for capital preservation, they are not entirely risk-free. Money market funds could face losses due to rare market disruptions, but stable value funds are often protected by insurance contracts. However, stable value funds can still risk losses if the underlying bond portfolio underperforms or if the insurer fails, but this is historically rare.

Both high-yield savings accounts and CDs at FDIC-insured banks (or NCUA-insured credit unions) are protected up to $250,000 per depositor, per institution, per account ownership category.

While the true ideal mix of low-risk, high-return investments depends on your individual goals, risk tolerance, and financial situation, there are some baselines you can keep in mind. For example, if you have short-term goals (one to three years), you may want to prioritize liquidity and may benefit from high-yield savings accounts, CDs, or money market accounts to preserve your principal. For medium-term goals (three to seven years) you might consider a mix of CDs, Treasuries, TIPS, and stable value funds to balance steady returns with some inflation protection.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.