Unless you only invest in cash, it is difficult to find something that is a guaranteed thing in terms of safety. A single glance at a news report about a chaotic economy is often enough to frighten many investors into selling stocks and shares and depositing the proceeds in a bank.
However, it is possible to select relatively secure investments that can still produce even small return and protect your cash from being eroded by inflation. Having said that, here are some normally safe investments to consider.
High-interest savings accounts
Given the historically low cash rate and the possibility that it will remain at 0.1 percent until at least the end of 2022, even so-called “high interest” savings accounts pay out low rates. You’re doing well if you uncover anything more than 1%.
While these are somewhat safe, they are only truly appropriate for those who are almost entirely risk-averse and, if you’re not concerned about your capital scarcely growing.
But wait, there’s a catch. With the Fed’s Bazooka blasting, the return on investment in a high-interest savings account will be much lower than the inflation rate. Currently, the inflation rate is around 5.4 percent, which means that keeping cash in the bank will cause you to lose purchasing power.
Long-term investing
To different people, sustainable investing means different things. Is it socially responsible investing, ESG investing, or ethical investing? It could mean any of these things. However, it is ultimately about you and your perception of what sustainable investing is and the values you seek.
Camille Love, Managing Director of eInvest, comments on this, saying, “We believe that sustainable investing is about investing in the future. What does a brighter future entail for us? It means that we want to invest in firms that make a beneficial and long-term contribution to society and the environment.”
“We are involved stockholders. We strive to interact with businesses in order to truly understand their sustainability credentials and assist them in improving them. We deal with firms on a variety of issues, including (but not limited to) gender diversity and board composition, supply chain and modern slavery, environmental footprint, and workplace safety.”
Love also adds, “In Australia, we’ve had bushfires, floods, COVID, and a number of firms with corporate blunders (e.g., RIO, AMP) in recent years. When you combine this with the Paris Agreement and the path to net-zero emissions that a number of firms and nations have committed to, you can see that this trend is here to stay.”
“Millennial and Gen Z investors are increasingly interested in investing in companies that have strong community values. Furthermore, a lot of Baby Boomer investors are shifting their portfolios toward greater sustainability in order to ensure that their legacy is left to assist future generations. As a result, there is a substantial amount of money to support this trend for the foreseeable future.”
Gold
Gold has long been regarded as the ideal safe-haven investment, with multiple studies and a look at gold’s price chart indicating that gold more than holds its own over the long run, even when the market experiences major short-term losses.
One of the most important advantages of gold is that it acts as a hedge against inflation. As a result, it is frequently a choice for investors seeking to diversify while keeping their investment profile relatively low risk.
If you want to invest in gold, you can do it in a variety of ways, including directly or through commodities exchange-traded funds (ETFs). The thing is, a gold ETF is not the same as literally owning precious physical metals, and this is due to manipulation in the gold and silver ETF markets.
Government securities
Government bonds are among the safest types of investments available, but they do not offer the same potential returns as stocks and shares. If you retain them to maturity, they can give a stable and reliable income as well as refund the bond’s initial face value.
Government bonds have a high level of liquidity as well. If you need to withdraw cash immediately from your investment, you should be able to sell quite readily. Government bonds are now performing poorly, but they may improve if investors shift their risk-on to risk-off position.
However, if/when that occurs, the ROI will most likely be short-lived. Bonds are excellent for transitioning between investments (i.e., a place to put your money temporarily) while you figure out what to invest in next.
Bonds issued by corporations
If you want to invest in bonds but the prospective returns from government bonds appear to be modest, corporate bonds can offer better potential returns, albeit at a higher level of risk.
Corporate bonds, on the other hand, are a safer investment than stocks and shares. When it comes to payments, bondholders have a greater priority than shareholders if a private company goes out of business.
Stocks of preference
Preferred stocks are a sort of hybrid securities investment that is popular because they provide both a regular income and value growth potential, thus combining the characteristics of a bond and a stock.
Although some preferred stocks are more risky overall, dividends are often guaranteed or paid out before common investors in the event of financial problems.
Even if a corporation has a bad year and the other shareholders don’t get a dividend, you might. In the event of a company’s failure, you will have a stronger claim than common investors (albeit still a weaker one than bondholders).
Property
Property is considered a generally safe investment, and depending on the nature of your investment, it can give both a regular income and capital growth.
If you already have a substantial amount of money, you might be able to afford to buy a house and then rent it out. Alternatively, you may invest in property and infrastructure securities, which would provide you with access to these investments and assets without requiring the funds (or risk appetite) to take them on solely.
Rentals are a common example of real estate investment, which can be scary to some investors because the obstacles of being a landlord differ greatly from the challenges of being an investor. That is why many investors hire a property manager to help administer the property; this allows the owner/investor to focus on other matters while continuing to earn income from their rental assets.
Insurance fees and the liabilities connected with being a landlord can also pile up when considering real estate investments. As a result, it is more vital than ever to set up technologies and tools to automate duties such as collecting rent or meeting physical security requirements for securing the property. Investing in proptech solutions such as access control, video, and occupancy management systems is a terrific way to secure your property and protect your investment in the future.
DeFi
When chatting with Ankitt Gaur, founder and CEO of EasyFi, he stated that risk and context play a role in determining investment value and returns. “There are certain safe investments in traditional finance, such as Government Bonds, and steady coin-based liquidity farming in DeFi.”
“However, there are risks to the entity or platform. If someone invests in a bond, for example, there is a risk that the organization guaranteeing the investment would fail. While there is no possibility of a centralized point of failure in DeFi, there is always the risk of smart contract compromise. As a result, while there are principally secure assets, the mode and routes of investment are always risky.”
Keep in mind to diversify
While seeking for secure assets is prudent, keep in mind that, depending on your investing objectives, it is often beneficial to have a varied variety of investments. Choosing safe investments may ensure some growth, but you may be restricting your earning potential if you do not also include some higher risk, potentially higher-earning assets in your portfolio.
Defining Security
David Packham, co-founder of Chintai, highlighted his 20-year trading experience on the definition of safety – and how it varies based on your aims.
“The definition of a “safe” investment is determined by a person’s specific criteria connected to intended objectives. For some, this means financial stability and limited or no downside risk. Others believe that keeping up with the real-term inflation rate is a safe bet. Others look at safety through the prism of medium and long-term returns, and they are less worried about volatility.
Asset-backed investments with acceptable liquidity and an established track record of long-term demand have historically been the safest investments. Examples include equities, commodities, and real estate, with Bitcoin arguably now sitting alongside commodities such as gold when considered over the medium to long term.
In our opinion, the best way to achieve personal safety while investing is to diversify exposure across several asset classes and be willing to look beyond short-term volatility when determining whether an outcome is good or not.”