How can I get started with low-risk investments?

How do I begin with low risk investments? For example CD’s, money market accounts, etc.

Submitted by Deirel M.

First of all, way to go! Investing is all about preparing for your future and the fact that you’re clear that you want low risk is an appropriate first step.

Are you ready to start investing?

How you begin depends on where you are in your investing journey. How much have you set aside to invest? Have you established an emergency fund to make sure you don’t need the money before a CD matures?

Let’s talk about certificates of deposit and money market accounts first.

What is a certificate of deposit?

Most certificates of deposit (CDs) require a minimum deposit to open. With a CD, you can’t add to the balance and you can’t change the term. Your rate of return is set for that period regardless of how the market fluctuates. If you withdraw the funds before it reaches maturity, you often pay fees and penalties. CDs have a wide variety of term (30 days, 60 days, 90 days, or even years) and, generally, the longer the term of CD, the better the interest rate.

What is a money market account?

Money market accounts (MMA) require a larger deposit to open compared a regular savings account and usually have limits on the number of withdrawals you can make in a month. Unlike a regular checking account, a MMA is an interest-earning account.

How to get started

So, now you know about the tools. What now?

If you’re starting out with no savings at all, one of the first things you can do is have a set dollar amount or percentage of your paycheck direct deposited to a savings account. If you can have it at a bank not connected to your checking account, that’s a bonus. Out of sight, out of mind. That can keep you from being tempted to make withdrawals (this is future money, right?). Once you have your desired amount, you can check with where the best rates for CD’s and money market accounts with Bankrate or check with your bank for their latest promotion.

If you aren’t quite ready to plunk down a large sum that you don’t touch, you can also explore other low risk investments like savings bonds and high-yield savings accounts. With these, you can start with as little as $50-$100.