One of the best investment strategies is to build an investment pyramid in which most of your funds would be in low-risk instruments (the bottom of the pyramid), while a small part of your funds go into risky assets like stocks. Some of the common low risk investment options that you can put your funds in are discussed here.
The simplest low risk investment is a savings account in a bank. Interest rates for such accounts are higher than those of checking accounts but lower than those of certificate of deposits (CDs). These accounts are used for building a fund for future use and getting some returns on it.
Withdrawal from these accounts is not as easy as in case of checking accounts. These accounts cannot be directly used to access money in form of checks. Withdrawals can however be made by ATM and Debit cards. Because of this technology, the difficulty in withdrawing has almost been removed.
Checking accounts are the simplest account issued by banks and credit unions. You can transfer the money freely and use checks for accessing your funds. They are insured by the FDIC up to $250,000. These accounts are used for making payments for bills and other transactions. Keep some minimum amount that you need for regular payments in these accounts and not any more, as they have very low interest rates.
Another common investment option is a certificate of deposit (CD), in which you deposit funds for a fixed time period. In return of locking your money, you get higher returns than what you would get in a savings account. The interest rate depends on the deposit size and the time period. Early withdrawal is possible after paying a penalty, which often requires you to forgo a part of the interest. These accounts are also insured by the FDIC. CDs are the safest form of moderate return investment because of the government backing.
Many other low risk investment instruments are offered by financial companies, but they are usually not insured by the government. Money market funds and stable value funds are comparatively safer and might give decent returns.
You can also go for corporate bonds for companies with a high credit rating. They are not as safe as CDs or savings accounts, but they yield significantly higher returns. You can invest in these instruments directly or through a fund that actively manages bond investments.