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Feeling Risk-Averse? 4 Steps to Invest in 'Safer' Options for Peace of Mind and Financial Wellness

Inflation is on the decline. The September 2023 rate of 3.7% is significantly lower than in 2021 when the rate hit a 40-year high of 9.1%!


The high inflation of previous months has created a silver lining for both risk-averse investors and those looking to reduce their portfolio risk. It has made high returns available for low-risk, safer* investment options, such as Certificates of Deposit (CDs) and Treasury securities like the 10-year note.

* All investments carry risk.


For instance, the 10-year treasury note has reached a yield of 5% for the first time in 16 years, and 12-month CDs boast interest rates that haven't been seen since the 80s, ranging from 5.5% to 6.5%!

The word "Risk" in neon colored lettering

Taking advantage of these high-interest rates is straightforward and advantageous for both risk-averse investors and those seeking to reduce risk in their portfolio. Below is a 4-step process to get started with CDs and Treasuries:


Step 1: The Basics

CDs and Treasury securities are low-risk investments. CDs are typically offered by banks, while Treasuries are issued by the U.S. government. They pay you back your initial investment along with interest. CDs and Treasuries have different duration during which you earn interest, and after the specified period, your initial investment is returned. Because your initial investment is returned and the interest you earn is guaranteed, these types of investments are considered low risk and "safe." But no investment is completely safe or without risk!


Step 2: Choose Your Investment

Determine the amount you want to invest and the duration you're comfortable with based on your goals.


CDs have fixed terms (e.g., 6 months, 1 year), while Treasuries have various maturities (e.g., 1-year bill, 10-year note, 30-year bond). With CDs, you'll receive your principal and interest at the end of the term. Treasury securities pay interest every six months and return your principal when they mature.


Step 3: Shop for Rates

Compare rates from different banks for CDs and the U.S. Department of the Treasury for the current interest rates on Treasuries.


There are various sites that compare CD rates daily, making it easy to know the current rates. You can also start by comparing the rates at your local credit unions and banks.


Step 4: Buy Your Investment

Once you find a suitable option, purchase the CD from a bank or the Treasury security directly from the U.S. government website, TreasuryDirect.


Hold your investment till the term ends or maturity is reached. You can choose to reinvest your money into another CD or Treasury security or cash out once your investment matures. If you wish to access your investment before its maturity date, with CDs, you are likely to incur a penalty in the form of forfeited interest. However, for treasuries, you can resell your investment at the prevailing price.


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In conclusion, the previous months of high inflation have created a silver lining by offering high returns for low-risk investments. This is good news, particularly for risk-averse investors but also for those looking to create a more balanced portfolio. These investments, such as CDs and Treasury securities, offer stability and security while protecting your capital and providing some growth.


Looking for expert coaching and guidance on the best moves for your financial situation? Schedule a complimentary financial coaching session.

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