Written by James Royal, Ph.D. – Edited by Andrea Coombes, CFP – Reviewed by Robert R. Johnson
From macroeconomic factors like inflation and job-market uncertainty to sector-specific disruptions, investors face risks big and small. Building a portfolio that has at least some less risky assets in it can be useful to help you ride out market volatility.
The trade-off, of course, is that in lowering risk exposure, investors are likely to earn lower returns over the long run. That trade-off may be fine if your goal is to preserve capital and maintain a steady flow of interest income.
But if you’re looking for growth, consider investing strategies that match your long-term goals. Even higher-risk investments such as stocks have segments (such as dividend stocks) that reduce relative risk while still providing attractive long-term returns.
What to consider
Depending on how much risk you’re willing to take, there are a couple of scenarios that could play out:
- No risk — You’ll never lose a cent of your principal.
- Some risk — You may lose money, but you often have a chance to make more than in a no-risk scenario.
There are, however, two catches: Low-risk investments earn lower returns than you could find elsewhere with risk; and inflation can erode the purchasing power of money stashed in low-risk investments.
If you opt for only low-risk investments, you’re likely to lose purchasing power over time. It’s also why low-risk plays make for better short-term investments or a stash for your emergency fund. In contrast, higher-risk investments are better suited for long-term goals.
Here are the best low-risk investments in 2025:
- High-yield savings accounts
- Money market funds
- Short-term certificates of deposit
- Cash management accounts
- Treasurys and TIPS
- Corporate bonds
- Dividend-paying stocks
- Preferred stocks
- Money market accounts
- Fixed annuities
Overview: Best low-risk investments in 2025
1. High-yield savings accounts
While not technically an investment, the best high-yield savings accounts offer a modest return on your money. You’ll find the highest-yielding options by searching online, and you can get a bit more yield if you’re willing to check out the rate tables and shop around.
Why invest: A high-yield savings account is completely safe in the sense that you’ll never lose money. Most accounts are government-insured up to $250,000 per account type per bank, so you’ll be compensated if the financial institution fails.
Risk: Inflation can erode your purchasing power.
2. Money market funds
Money market funds are pools of CDs, short-term bonds and other low-risk investments grouped together to diversify risk. They’re typically sold by brokerage firms and mutual fund companies.
Why invest: These mutual funds will pay out cash interest on a regular schedule, typically monthly. Unlike a CD, a money market fund is liquid, which means you typically can take out your funds at any time without being penalized.
Risk: Money market funds usually are pretty safe, says Ben Wacek, founder and financial planner of Guide Financial Planning in Minneapolis.
“The bank tells you what rate you’ll get, and its goal is that the value per share won’t be less than $1,” he says.
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