Kavan Choksi Discusses a Few High-Return, Low-Risk Investments That Are Ideal For Retirees

Protecting money is as important as growing it, if not more. Capital preservation especially becomes vital for investors approaching retirement. Kavan Choksi mentions that the majority of retirees would not want to be making withdrawals from stocks that are trading lower, in a market downturn. This is where lower-risk investments come in. They generate income from assets that allow retirees to hold onto their stocks instead of liquidating at fire-sale prices.

Kavan Choksi talks about a few high-return, low-risk investments that are ideal for retirees

There are many low-risk income investments that can effectively help retirees to offset stock market risk, or at least provide them with a place to stash money for a short time while earning interest. High-yield savings accounts are one such investment vehicle. Much like their name suggests, these accounts provide higher interest rates in comparison to standard savings accounts. These accounts are especially a smart choice for retirees seeking low-risk growth for their cash while keeping it easily accessible. High-yield savings account would especially be ideal for emergency funds and short-term savings.

Certificates of Deposit would also be a good place to park money. They are basically fixed-term savings accounts that offer guaranteed interest rates. This fixed term can range from a couple of months to multiple years. Certificates of Deposit, also known as CD, tend to be ideal for investors desiring to earn more than a traditional savings account may pay. They also provide a hedge against inflation without the market risks. Certificates of Deposit are insured by the Federal Deposit Insurance Corp. or National Credit Union Administration, which basically implies that they are protected against bank failures.

A large number of retirees choose to invest in U.S. Treasury Bonds. These are long-term, U.S. government-backed securities that provide investors with a fixed interest semi-annually. The investors ideally receive the face value of the bond at maturity. U.S. Treasury Bonds are quite similar to CDs, except that bondholders are not required to hold the investment for any specific period of time. However, investors do have to hold it for the cycle of the bond to get the full yield. For instance, if a five-year bond pays 4% interest, the investors shall have to hold it for the entire five years in order to realize that 4% annual return. U.S. Treasury Bonds are highly liquid. Investors can easily buy and sell them off on the secondary market and pull their funds out if they need that money in an emergency. This investment instrument can also be used to hedge against inflation and guarantee monthly payments for retirees.

Kavan Choksi points out that Treasury Inflation-Protected Securities or TIPs is another high-return, low-risk investment that are ideal for retirees. They basically are U.S. government bonds with principal value that tend to adjust along with changes in the consumer price index. When inflation goes up, the principal of the bond also increases. This results in higher interest payments, as these payments are based on a percentage of the adjusted principal.