The best low-risk investments in 2024
Every investor has their own risk tolerance, which will also vary depending on their stage of life, economic situation, immediate plans, etc. In this article, we will focus on simple products designed for those who want to take on little risk but without entirely giving up returns. Here are some of the best low-risk investments in 2024.
Bank deposits
Is having money in the bank considered investing? Well, some banking products, such as term deposits, can be seen as a cross between saving and investing. In fact, they are sometimes called savings-investment products. The fact is that many savings accounts offer returns – albeit very modest ones – to their holders. It is the compensation the bank gives for using the depositors’ money for other purposes. Since the risk is practically zero – accounts up to 100,000 euros are protected by the Deposit Guarantee Fund – the return is very limited.
With the rise in interest rates, banks have had more room in recent months to increase the remuneration of their products. However, this return rarely surpasses inflation; that’s why it is often said that money in the bank tends to lose purchasing power. Nonetheless, today you can find accounts that offer up to 3.5% APR or even 3.6% in the case of one-year deposits – which require the money to be in the account for a year. It is an ideal option for those who prefer to avoid market volatility.
Money market funds
Money market funds are clearly an investment product. They are a type of investment fund that invests in money market instruments, commonly referred to in English as ‘cash and cash equivalents,’ and very short-term debt securities. These types of assets are very safe and very liquid – they can easily be converted into cash – so the return they offer is necessarily very limited. Although they usually offer slightly more return than deposits, it is often not enough to offset inflation. However, they tend to have low management costs, making them accessible to a wide range of investors seeking liquidity and stability.
Government debt
Debt securities issued by public administrations are considered safe-haven assets. The reason is simple: it is considered extremely unlikely that a government will not be able to meet its debt payments. Therefore, with the prospect of zero risk, investing in government debt is attractive to conservative investors. You may have guessed that the expected returns here are small and usually linked to the evolution of interest rates.
As rates remain relatively high – at their highest level since May 2011 – investments such as Treasury bills have experienced a sort of boom in Spain. The acceptance of these securities – which in the latest auction offered a marginal interest of 3.55% on six-month bills – remains strong, anticipating that rates will moderate in the coming months.
Fixed income funds
Fixed income funds systematize investment in public debt assets, like those described above, as well as in corporate bonds – debt issued by companies. These funds can offer a balance between risk and return, as they diversify investments across various issuers and maturities. Short- and medium-term fixed income funds tend to be less volatile than long-term ones, making them a suitable option for those seeking stability in their investments. In 2024, fixed income funds are likely to remain a solid choice for investors looking to minimize risk.
Individual systematic savings plans (PIAS)
PIAS are long-term savings products that combine the features of life insurance with investment. These plans allow for periodic or one-time contributions, and the returns generated are tax-exempt if certain requirements are met. Additionally, they offer the possibility of converting the accumulated capital into an annuity, providing an additional source of income in retirement. PIAS are ideal for those looking for a secure and tax-efficient savings tool for the long term.
Guaranteed funds
The name suggests something like a panacea: an investment with a guaranteed return? Guaranteed funds offer something like that, although there are several types. Fixed-return guaranteed funds commit to returning the principal – the invested capital – with a predetermined fixed return. You may have guessed that the return is small. On the other hand, variable-return guaranteed funds only guarantee the initial investment, and partially guaranteed funds preserve a percentage of the invested money, which does not have to be 100%.
These funds usually have a specific duration and are linked to the performance of various assets, such as stock indices or interest rates. Although the return on guaranteed funds may be limited, the security they offer makes them attractive to investors who prioritize capital protection. In 2024, guaranteed funds can provide additional peace of mind in an uncertain financial environment.
Real estate crowdfunding
Investing in real estate crowdfunding can also be considered low-risk, though slightly higher than the previous options. Real estate has traditionally been considered a safe-haven asset due to its stability and low correlation with financial markets. The advantage of real estate crowdfunding through platforms like Urbanitae is that it allows for investment with little money – 500 euros on Urbanitae – and therefore, more diversification than conventional real estate investment. Additionally, it usually offers much higher returns compared to the alternatives we have discussed.
Thus, deposits, money market funds, government debt, fixed income funds, PIAS, guaranteed funds, and real estate crowdfunding are some of the best low-risk investments in 2024. As always, we recommend that before investing, you carefully review the information on each product to ensure you understand how it works. And plan your investments according to your risk tolerance and your short- and medium-term needs.