WHAT IS CONSIDERED A LOW-RISK INVESTMENT?
What is considered a low-risk investment? All investments come with risks. Find out what investments are not only relatively safe but also high yielding!
Today I’ll answer your question, “What is considered a low-risk investment?” and give you low-risk examples. If you’re asking the question, you’re concerned about the future, and you’ve probably listened to many different and unique answers.
I’m Ted Thomas, and I’ve been involved in tax liens and tax deeds for over 30 years. I prefer the smallest risk possible. By the time we finish, I’ll have discussed alternative investments and their risks.
More than likely, you’ve read or attended other economic conventions, classes, and seminars. You’ve read about different gurus and ideas, and you’ve talked about the economy and what you think is risky. So, let’s talk about that first.
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WHAT IS CONSIDERED A LOW-RISK INVESTMENT? – TREASURY NOTES
The United States government treasury notes seem to be the preferred investment with the least risk. Registered investment advisors, stock brokers, real estate people and financial people will probably say the least risky investment is a United States treasury note.
Along those lines, safe investments are referred to as the gold standard, meaning that these are the best and safest investments. Safest investment means the least risky investments.
Let’s assume we agree with the stock brokers, investment advisors and other gurus that treasury notes are the least risky investment. We could easily confirm this to be true because countries like China invest in US treasury notes, which usually only pay 1% or less.
I’m not going to bad mouth or critique treasury notes or gold bullion or precious gems because the market considers those to be very safe. However, safe does not necessarily mean you’re going to make the most money.
WHAT IS CONSIDERED A LOW-RISK INVESTMENT? – RISKS
Let’s face it. Investing has risks. The government is constantly trying to assure us they are doing good and taking care of the management of the government, military and economy. After all, anyone could easily research the past 20 years in Afghanistan and you know a lot about it, the results of government.
Here’s what I know. Investing is risky. What is considered a low-risk investment vs a high risk investment?
My simple answer is a low-risk investment means you are acknowledging that you’d better learn to take care of yourself no matter what you learn. You’d better prepare for some dramatic changes in the next 20 years.
So, what is considered a low-risk investment? I would say picking the right program is going to be helpful. Try not to speculate with money you cannot afford to lose.
WHAT IS CONSIDERED A LOW-RISK INVESTMENT? – THE ECONOMY
Having lost millions after growing as much as a 1,000% annually for a number of years, I learned the hard lesson of not depending on things being the same. Economies change rapidly.
Avoiding risk is impossible. It could be a change in the weather. It could be a change in your family, like a tragedy, or it could be a business misunderstanding. The worst that can happen is that the politicians don’t act in good faith.
Many economic advisors consider US treasury notes to be the best. It seems your money will be safe as long as the government survives.
WHAT IS CONSIDERED A LOW-RISK INVESTMENT? – PROPERTY TAXES
Here’s what I know at this writing, for over 200 years, governments have taxed people in the United States. They tax property owners as a wealth tax. The government calls that a property tax.
The local government, much like state government and certainly the federal government, spends money that they bring into their treasury from taxes on income and property.
The county does not have a mandate or a statute that allows the county to print money, but this does not keep them from spending more than they have. Budgets have overruns that make the headlines even though bills must be paid. How many times have you heard that?
Property taxes are important to the county officials. That’s the money that pays them.
WHAT IS CONSIDERED A LOW-RISK INVESTMENT? – TAX LIEN CERTIFICATES
Today I’m answering your question, what is considered a low-risk investment? My answer is as follows.
A tax lien certificate is considered low risk, and you should be asking me why. The answer is because the property owner certainly doesn’t want to lose their property. However, they did not pay the tax.
Most property owners will work hard and almost do anything not to lose their property for the small amount of property taxes which are 1% or 2% of the total value of the property.
For example, a $100,000 property may have property tax of 1% or 2% and that translates to $1000 to $2000 in taxes due. It’s not likely they will lose the property for such a small amount. However, the local government will issue a tax lien certificate if they have not received payment.
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WHAT IS CONSIDERED A LOW-RISK INVESTMENT? – AN INVESTMENT SECURED BY REAL ESTATE
I perceive this as a low-risk investment, not as low risk as US government treasuries. However, low risk because if the owner does not pay and you own the tax lien certificate, you will end up owning the property without a mortgage for 1% or 2% of the property’s assessed value.
The math on this equation works out quite well for the investor because tax lien certificates pay outrageously high interest rates.
My solution is overly simple. I have adjusted my vision to looking and realizing that the local government is selling a tax lien certificate to develop revenue to pay the county officials and pay hundreds of other county generated bills, schools, roads, and hospitals.
If you’re an investor, avoiding risk should be your primary thought. With a little innovation and understanding of the system in place, you can deal with making money honestly and ethically.
WHAT IS CONSIDERED A LOW-RISK INVESTMENT? – TAX LIENS AND TAX DEEDS
Not every community sells tax lien certificates. Approximately half of the counties within the United States sell these safe and secure certificates. The other half of the counties sell tax deeds.
Taxing districts include municipal governments as well as county governments. These are taxing districts that always need money. They produce a wealth tax for property owners, and the system has been in place for over 200 years.
WHAT IS CONSIDERED A LOW-RISK INVESTMENT? – TAX LIEN CERTIFICATE INTEREST RATES
Tax lien certificate investors purchase a certificate that allows generous rates of return and simultaneously provides safety. The rates of return are established by the state legislature and enforced by the local counties.
The lowest rate of return that I’ve seen is 8% interest, and the highest I’ve ever seen is 50%.
Currently, the lowest rate is 12% and the highest rate is 36%. It takes research to figure out which state and county have the highest rates.
Tax lien certificates are generally considered a safe, secure investment and they are available in small denominations, less than $1,000 as well as large denominations of hundreds of thousands of dollars.
We hope you enjoyed Ted’s lesson, “What Is Considered a Low-Risk Investment?”
Most people would say that US treasury notes are the best low-risk investment, but with interest rates being so low, US treasury notes don’t keep up with inflation.
However, there are low-risk, high-return investments. Tax lien certificates are issued by local governments and pay interest rates of 16%, 18%, 24% and even 36%.
Additionally, tax lien certificates are secured by real estate. So if you don’t get paid, you get the property, and you get it without a mortgage!
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