What are Safer Investments? 3 Things to Consider
03 20 2017
You work hard for your money. So it's only fair that your money works hard for you.
That's the simple principle behind investing: to position your capital to give you the long-term security you need ... to help you plan for the life you want ... to remove some of the worry and hassle out of life ... and to deliver the peace of mind you deserve.
No Such Thing as 'Safe' InvestmentsAt Woodbridge Wealth, our clients and partners ask us every day for our "safe investment" suggestions. They're looking for ways to maximize return and minimize risk.
But let us be clear. There is no such thing as a 100 percent safe and foolproof investment. It doesn't exist.
No one can predict the future. Market swings can have massive impacts on stock trading and value. Housing markets ebb and flow. Even bonds and savings accounts can be affected by real-world factors outside of our control like the current interest rate.
But There Are SAFER Investment Options to ConsiderThat said, you can seek out "safe-ER" investments and lending opportunities. A safer investment inherently recognizes these external factors and builds in measures and safeguards to help protect your hard-earned money should the unforeseen come to pass.
Here are three things to consider when trying to find some of these safer investment or lending opportunities:
1. Consider Your Own Tolerance of Risk.Safe is a relative term. It means something different to every single person because each of us has a different idea of how much risk we're willing to accept to see our money grow. What is considerably risky to one person might be completely safe to another.
And there's a tradeoff. Higher risk investments often have higher returns. The opposite is also true. Safer investments usually have a lower rate of return.
If you're looking for safer investments, the very first thing you must do is establish how much risk you're willing to take. Any financial products that do not exceed that risk threshold are then considered safer investments.
Our suggestion: Develop a list of investment opportunities that fall below your risk tolerance level and then weigh those options in descending order of the potential return. With this list, you'll have an array of investments that meet your safety needs, but will still maximize your return on investment.
Here are some questions you may want to ask yourself:
2. Consider how much you trust the institution backing your investment.Many financial and insurance companies offer annuities, lending or investment opportunities that guarantee a specific rate of return. That's great. And it seems safe.
But in many cases, that guarantee is only as secure and solid as the company issuing it.
If you remember nothing else from this article, remember this: research any company you invest with. Look at their returns. Look at their commitment to earning their clients' trust. Look to see if they have a proven track record of success.
3. Consider your goals.We've mentioned it before, but it bears repeating. Don't just invest to invest. Don't just lend to lend. Make your financial planning strategy truly work for you by marrying it to your goals. To that end, it's good to know when lower-risk, safer investments are appropriate and meet those goals. Here are some examples of when a safer, lower-risk investment might best suit your financial strategy:
a) You want to create an emergency fund to have available.
b) You know you may be making a significant purchase in the next few years and want to have access to liquid capital.
c) You've explored other options and don't know what else to do with your money.
d) You're at a place in your life when you simply aren't willing to take on new risk with your finances.
Know What Lending Opportunities Are Available to YouWhen it comes to investing your hard-earned money, there's no question you need to understand the opportunities available to you - financial products, institutions, terms, and commitments. But mastery of those topics only matters in the context of your own situation and strategy. Establish your risk threshold first, and that will make it easier down the line to identify safe investments that meet your financial needs.
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