Guide to Low-Risk Investing

No risk appetite? No problem. Here is your guide to low-risk investing.

You can make anywhere from 10-50% return on your money with these vehicles – with far less risk than the stock market.

We are all seeking greater returns, especially in the days of .01% interest checking accounts and  2% CDs. I personally like the idea of the 8% you can get (historically, of course) in the stock market, but I would prefer to get these returns with little or no risk. So what’s a greedy (but nervous) investor like you or I supposed to do?

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Low-Risk Investing

Well, here are a few ways you can make back your money at 10% or far more – virtually guaranteed:

Investment: 401k Match

Return: 50-100%

Difficulty Level: Duh

This is the easiest decision imaginable. If your company matches your 401k contribution, make sure you invest at least up to the match (e.g., if they match 50% of your investment up to 6%, contribute 6% to get a free extra 3%).

Now I know that not everybody can shave 6% or more off their paycheck, especially if they’ve been following my advice and buying Porsches and Pradas, not to mention going into debt to attend Ivy League schools.  However, with a guaranteed 50% return, it’s even worth borrowing at credit card rates of 12 or even 21% (see below) to do this.

Investment: Pay off credit cards

Return: 12-24%

Difficulty Level: Obvi

If you have any cash lying around after that 401k contribution, my first recommendation would be to invest it in any high-interest debt you may have. With the average credit card interest rate now at an astronomical 21%, I almost long for the days when I owed $100,000+ in credit card debt, just for the massive return I’d make by paying it off.

If you don’t have the cash to pay off those credit cards, you can still get an effective return of 10%+. Just transfer your balance to a zero percent (meaning: 4%, since that’s the transaction fee) card. On debt tied to a 21% interest rate, that’s still an effective return of 17%.

Bonus strategy: If you’re completely broke, why not combine strategies 1 and 2, funding your 401k (50% return) with money borrowed from 0% interest credit cards (4% cost). That nets you 46% on your money – not bad for a start!

Investment: Solar Panels

Return: 10-25%

Difficulty Level: Modest

I should start this recommendation with a caveat: the savings one gets from solar panels can vary from state to state (depending on incentives) and varies by climate (panels in sunny, warm climates generate more power, so the savings are greater). Studies have shown that the savings on solar panels, even at a $15,000- $20,000 investment, can range from 10-25%.

The attractiveness of investing in solar comes from several sources:

  • Government incentives: which vary from state to state – and year to year – but can reach 25% or more of the total cost.
  • Utility bill savings: estimates are, nationally, a savings of $125 per month. But I know people whose energy bills have been reduced almost to zero, so check your local market.
  • Resale: any logical buyer would pay more for a house with solar panels, up until the point where they break even on their money. So, for example, if your solar panels save you $125 per month, that’s equivalent to a $33,000 discount on the house price. So you should assume that at least some buyers will pay more for a solar-powered house – in all likelihood covering your initial investment.

Investment: Electric Car

Return: 15%+

Difficulty level: Moderate

After federal tax credits, electric cars cost about $4,000 more than comparable gas-powered vehicles. However, annual savings are approximately $632 per year – for a yield of 15.8%. It seems like these savings will only increase in future years as governments raise taxes on gas to raise revenue and fight pollution/climate change. I know that in California, premium gas is still around $4.00/gallon, despite historically low oil prices.

Adding it All Up

One of the biggest challenges in generating above-average investment returns is scaling these opportunities. That’s why I decided to see what it might look like if a hypothetical family with $35,000 to invest might see as their returns if following the advice above. Here’s how it all breaks down:

  1. 401k Match: let’s assume a slightly higher than average salary if this family has $35k to invest, say $100k annually. They would invest $6,000 (6%) into a 401k, generating $9,000 total

Return: $3000

  1. Credit cards: The average household with credit card debt owes approximately $9333. At an average of 21% interest, paying this off would yield $1959 annually.

Return: $1959

  1. Solar: Assume a $15,000 investment after tax credits, yielding $125 per month.

Return: $1500

  1. Electric car: I will only count the $4000 additional premium paid for an electric car. As stated above, this should save $632 per year.

Return: $632


Total Investment: $34,333

Total return ($): $7091

Return rate: 21.7%


Low-Risk Investing Honorable Mentions:

Have more than $35k to invest? Here are some more ideas, not necessarily as passive or risk-free as those listed above, but still very likely to produce returns of 10% or more:

  • Real estate: with 20% down, most real estate investors earn far more than 10% on their initial down payment. Tax benefits such as depreciation also make much of this return tax-free. Of course, this option is far less passive than any of the ones above.
  • Education: no, I’m not talking about that degree from Harvard, just something a little more modest like a coding class from Udacity or Udemy. They only run about $200 per month so that you can have a degree for just a couple thousand dollars. Salaries for front-end developers are in the low six figures,  so the payout is astronomical. Once again, this is almost the least passive of investments but could have the highest return.
  • Equities: you could do a lot worse than just throwing your hands up and putting your money into index funds. Risk is higher than any of the options above, but historical returns are 8% in the long run. You just have to be able to stomach the inevitable ups and downs (see: 2009).


Have you found success with any of these strategies? Do you have any foolproof 10%+ ideas to add? Tell me about it in the comments below. 

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3 thoughts on “Guide to Low-Risk Investing”

  1. Great suggestions! Out of all of these I think paying off the credit card should be first. Earning 21% on your money is nearly impossible over a long period of time, and yet we pay that on our average credit card debt all the time!


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