3 Reasons Most People Do Not Think Their Investments Are Safe — Are They Right?

Jacob Wade
PeopleImages / iStock.com
PeopleImages / iStock.com

Investing can help you build wealth. But investing involves risk, and that scares many Americans.

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In a recent survey from GOBankingRates, we asked where people thought the safest place to keep their money was. The answers revealed a lot about the types of accounts people trust with their cash, and the ones people tend to avoid.

We’ll break down the answers below, but we also asked a few financial experts their opinions on whether Americans should trust any of these accounts and why.

Where Are ‘Safe’ Places To Put Your Money?

In general, there are a few places you can park your cash that are considered “safe.” These accounts are safe because they offer deposit insurance or because they are backed by the U.S. government. The safest accounts are:

  • Checking accounts: Standard checking accounts are FDIC-insured up to $250,000 and considered safe.

  • Savings accounts: Standard savings accounts are also FDIC-insured and a safe place to park your cash (and earn interest).

  • Certificates of deposit (CDs): CDs are timed deposit accounts that are FDIC-insured and pay a higher rate of interest for locking up your money for a set period of time.

  • Money market accounts: Money market accounts are a type of savings account that pays a high interest rate but can also come with check-writing privileges and an ATM card.

  • U.S. Treasuries: U.S. Treasuries are government-backed debt securities that are known as one of the safest bonds in the world. You can buy Treasuries in different maturity lengths and earn interest.

There are other places you can stash your cash, but they tend to come with a bit more risk. These investments can lose value over time and don’t guarantee a return.

  • Bonds: These are government or private debt securities that make you the lender — and you collect regular interest in return. There are thousands of different bonds, and you can invest in a bond fund to own multiple within a single investment. Bonds are seen as “lower-risk” investments because they can be backed by the government and are evaluated for their risk profiles.

  • Stocks: Stocks are ownership in a publicly traded company. These are seen as riskier investments because they come with a real risk of loss and can even go to zero. Investing in stocks has a high upside, but you can quickly lose money investing in stocks as well.

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Most Americans Don’t Trust CDs, Money Market Accounts and US Treasuries the Most

In a recent survey by GOBankingRates, 82% of Americans said that the safest place to keep their money is in a checking account, savings account or at home (in cash). This means that most Americans don’t trust other types of accounts and investments as much.

This could be for one of several reasons, including:

  • Lack of knowledge: Some people might not know that CDs and money market accounts have the same protections as savings and checking accounts. Most are FDIC-insured and come with up to $250,000 in protection.

  • Distrust of banks: Thirty percent of respondents said they would rather keep their money at home than anywhere else to keep it safe. This shows a distrust in the American banking system, which may be somewhat warranted. In 2023, there were several bank failures that made the news, including the second-largest bank failure in history with Silicon Valley Bank going under. While every person was reimbursed by the FDIC, this caused concern among Americans.

  • Lack of access: CDs and U.S. Treasuries are not the most liquid investments — and maybe some Americans don’t want to lock their money up. CDs require locking up funds for a few months up to a few years. And U.S. Treasuries have a set maturity date (though you can sell them). This lack of access to cash may be a reason Americans don’t see these accounts as safe.

The Pros and Cons of ‘Safe’ Investments (According to Experts)

When trying to pick out safe investments that can still grow, you need a mix of different investments to diversify your portfolio. We asked a few financial experts for their opinions on which safe investments are best — and what they don’t like about them too. Here are some of the pros and cons of each type of investment.

Pros and Cons of CDs

“CDs are generally considered a low-risk investment because they offer a guaranteed return and are typically FDIC-insured up to $250,000,” said Bob Anarumo, financial expert and real estate agent at Florida Realty Marketplace. “This makes them a good choice for conservative investors who prioritize capital preservation over high returns. They are especially useful in a low-interest-rate environment when keeping cash idle might mean losing purchasing power to inflation.”

Anarumo doesn’t think CDs are for everyone, though.

“The main downside is their lack of liquidity,” Anarumo said. “Withdrawing money before the CD matures often results in penalties, which can deter investors who might need quick access to their funds.”

Pros and Cons of Money Market Accounts

While most Americans trust savings accounts, they don’t seem to have the same faith in money market accounts. It may be a misunderstanding of how they function, but most money market accounts actually offer the same protections and access as savings accounts.

“Money market accounts (MMAs) offer a middle ground between savings accounts and other higher-yield investments,” Anarumo said. “They’re typically FDIC-insured, making them a secure place to park cash while earning a modest return. They’re ideal for those who want easy access to their funds with a bit more interest than a traditional savings account.”

The biggest downside is that some money market accounts have an account minimum that could be $1,000 or more. Plus, some limit the amount of withdrawals you can make in a month.

Pros and Cons of US Treasuries

U.S. Treasuries are usually seen as a safe investment, but with staggering government debt numbers (over $34 trillion) and a recent downgrade in the U.S. credit rating, people may be skeptical of the stability of government bonds. However, the U.S. has yet to miss a payment in decades, and Treasuries can help you diversify your money while keeping it safe.

“U.S. Treasuries still play a crucial role in diversified portfolios,” said Abid Salahi, financial expert and founder of Finly Wealth. “They offer a hedge against stock market volatility and can provide steady, albeit modest, income. For retirees or risk-averse investors, allocating a portion of their portfolio to Treasuries can help preserve capital during market downturns.”

Pros and Cons of the Stock Market

Investing in the stock market isn’t “safe,” but it can help you build wealth. That’s why it’s a good idea to add stocks into your investment portfolio for long-term investing. However, it might seem scary to invest in stocks when there are recent market crashes that wiped out many portfolios.

“The stock market’s inherent volatility and memorable crashes, such as the 2008 financial crisis and the 2020 pandemic-induced plunge, have left lasting impressions on many Americans,” Salahi said. “The rise of high-frequency trading and complex financial instruments has further alienated some investors who feel the market is rigged against them.”

And while this is all true, the market does grow more than most other investments.

“Historical data shows that over long periods, the stock market has consistently outperformed other asset classes,” Salahi said. “From 1926 to 2024, the S&P 500 delivered an average annual return of about 10%. For long-term goals like retirement, a diversified stock portfolio remains one of the most effective ways to build wealth.”

Where Should You Invest Your Money?

It’s important to have a plan for your money. And keeping cash under your mattress won’t help you build wealth and is actually riskier than keeping it in a bank.

But when it comes to protecting your money and trying to grow it, it’s important to understand risk. Knowing your risk tolerance and how much volatility you can endure with your investments will help you choose where to put your money.

For example, if you want to keep your money safe but still earn a return, choosing an account like a money market or CD may be a good choice. These accounts typically pay higher interest than a savings account (or keeping cash) but are also protected with FDIC insurance.

If you don’t mind seeing your account balance go up and down, investing in bonds or the stock market can have greater long-term returns than “safer” investments. And while there is a risk that a single stock can drop in value and never recover, investing with index funds that follow popular market indices can help you grow your money for retirement and other financial goals.

As with any investment choice, you need to review your own financial goals, timeline and risk profile before choosing. And if you’re not comfortable choosing investments for yourself, it may help to hire a licensed financial advisor. Just make sure you understand how the advisor gets paid and their investment approach before you hire them.

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This article originally appeared on GOBankingRates.com: 3 Reasons Most People Do Not Think Their Investments Are Safe — Are They Right?

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