When you think of the term “investing”, does it leave you feeling anxious? If you’ve been contemplating doing it but you’re risk-averse, you should know that there are options you can consider that can see you growing your money despite your fears.

What to consider

Let’s say you want to build an investment portfolio but want to start slow so you can minimise risk associated with investment and thereby lower your risk exposure. First, you need to understand that in the world of investment, the lower the risk the lower the gain. Usually. The converse is true: the higher the risk, the higher the gain. Usually. This is why a diversified portfolio is recommended in which you mix high with low. But if, as said before, you just want to get your feet wet, build your confidence by preserving capital and maintaining a steady flow of interest income until you are ready to increase your investment strategy, consider these five low-risk investment options.

1. High-yield savings accounts

Technically, as the name suggests, these aren’t really investments but they yield more than the modest returns on regular savings accounts and are Government-insured so you won’t lose a cent of your principal. These accounts are for getting your toes wet and are good if you’re at the beginning of your career with little savings and are really only just venturing out into the world of finance. Not ideal if you have long-term goals of, say, further education, travel or even retirement.

2. Certificates of deposit (CDs)

Banking institutions in Jamaica are regulated and thus, term-length CDs are loss-proof except if you take the money out earlier than the agreed-upon term, at the end of which the bank promises to pay you a set rate of interest, which you have the option of rolling over. CDs, too, are ideal for young or nervous investors as large deposits are not required. They are best kept for money you’ll need for a specific purpose in the future, like a wedding or a deposit on a home. Just keep in mind that if you remove the funds before the contracted time it will affect the interest you earn, and, in some extreme cases, perhaps even a portion of your principal. It’s important to check what the penalty structure of your CD is before you purchase it. Don’t buy a CD with money you might need soon.

3. Government bonds

Good for conservative investors a little further along in their careers who’ve been able to amass some savings and who are contemplating medium- to long-term goals like buying a car or a house. These bonds, issued by the Government, are secured investments and are really a loan from you to the Government for a set period of time. There’s a set interest rate paid every three or six months, providing a steady income stream to the investor with a minimum investment of J$200,000.00. The drawback? Although secure, you won’t see a high rate of return. A portfolio of 100 % bonds alone, as against a mix of stocks and bonds, probably won’t suffice for longer-term goals like home ownership.

4. Money market mutual funds

Investing in a mutual fund is ideal for investors who need money soon. When you invest money in a stock market fund it buys a variety of high-quality short-term government, bank or corporate debt. These funds are good for holding your money in an investment environment that is safer than stocks, or as a holding area for money for future investment. But while these funds are technically investments, their growth is more in keeping with high-yield savings account dividends, meaning, whilst your risk is low, so are your returns.

5. Exchange traded funds (ETFs)

If trading on the stock exchange conjures up every scary Wall Street movie you’ve ever seen, you can still invest tangentially on the exchange by way of industry. This means spreading your money across an industry via an industry-specific investment fund or an industry-centred ETF, let’s say food, for example, as against buying individual stocks. ETFs became popular after the global financial meltdown of 2008, when investors started becoming more risk-conscious and looking for safer investments.

These funds trade on the stock exchange like any other stock, holding a set of assets whose composition mimics an index. Ideal for more savvy investors who can find bargains in subsets of stock market sectors that are expected to grow. ETFs are attractive because it is usually easier to assess how safe an investment is across an industry sector by predicting the longevity of that industry’s products and services than it is to predict how well a single business will do.

Bottom line

Investing, when done in a responsible way, is the best way to grow your money. But it always involves some amount of risk. Speak to your money advisor about which low-risk investments might be best for you to ensure your financial security.