What is a Safe Investment?

Wealth Creation is probably one of the biggest dreams for any individual.

As you may be aware, financial security and well being are interlinked.

You tend to live a happy and prosperous life if you are financially well-off and secure.

To be financially secure, you need to have ample amount of wealth with you.

And you can create wealth by investing your money.

But is it really as easy as it sounds?

Creating wealth by investing money is really not that easy as it sounds.

The main reason for this is the fact that most investment options that yield a high rate of return are risky. Meaning, there is no surety that your invested sum would give you positive and high returns. It may even give you negative returns, and you may end up losing your money rather than making gains. A most relevant example of this is investment in the stock market. You may have even heard people losing their money by investing in the stock market.

So is there any way out by which you can grow money and still can avoid the risk of investment.

Then the important thing here is to make safe investments.

Obviously you have to consider what is a safe investment for you. You have to figure out a safe investment path for yourself. Well, primarily you have to know, what is a Safe Investment?

Safe Investment

Definition of Safe Investment

An investment can be termed as a safe investment when it gives you good returns with relatively little or no risk at all. Though there are lots of investment options, but every investment cannot be regarded as a safe investment. There are certain characteristics by which you can make out that a particular investment is a safe investment or not.

Firstly, a safe investment usually has a diversified portfolio. You make investments in various market segments so that if one sector falls you can cover up by making gains in other segments.

Secondly, safe investment bears low risk. Meaning, the rate of return though are low and usually assured.

And thirdly, safe investments are determined by the time span for which you make investments. For example, stock market investments for short-term are generally not considered being safe, but if you take a time span of say ten years, they tend to become safe investment option for you.

Apart from the above factors, a safe investment keeps your principal intact. Chances of losing your principal money that you have invested are negligible in a safe investment.

When should you make a safe investment?

The answer to when you should be doing a safe investment lies in the time span of investment. If you have a short term investment goal, then your obvious choice should be to take the route of a safe investment.

In a short term say six months to three years, the risk of investment is pretty high. If you are not willing to take the risk, the good choice for you is to go for doing safe investment. The rate of returns would be low, but you would be able to safe guard your principal.

Then, secondly if you are in the higher age bracket, say above 50 years, then too safe investments would turn out to be a good choice, as in this age you would prefer low returns rather than to lose your money in anticipation of high returns.

Lastly, if you have limited amount of money that you just can’t afford to lose and prefer low risk and low return scenario then the most suitable choice for you is to go for a safe investment.

Examples of doing safe investment

Now, we show you various options of doing a safe investment. When you have, limited sum of money to invest and choose a short-term of investment then you can safely go for any of these safe investment options. Some safe investment options listed below are good for a long-term investment scenario. You can even choose to invest in different types of safe investment options, as well.
Savings Account: Having a savings account in a bank keeps your principal safe and provides you a marginal rate of return. Basically for those who do not want to take any risk of investment and have a small amount of money to invest.

Certificate of Deposits: Also known as Fixed Deposits offer small rate of return, but good to protect your principal money. They possess virtually no risk of investment.

Bonds: These include Government Securities, Savings Bond, Treasury Bonds, Notes, Bills, etc. They have a low risk of investment and offer decent rate of return too. You can even start investing with a low sum of money.

Equities: Have a high risk of investment but can be a good investment option for a long term of ten years or more.

Fixed Annuities: Have guaranteed returns for which you require to enter in a contract with an insurance company. You do not have quick access to your money and returns start only after a definite period of time.

Gold: Investment in Gold is beneficial in the long term.

Real Estate: Profitable in the long run, but with unpredictable returns.

Mutual Funds: Low risks as compared to investment in stocks. Provide high yield, but returns are not guaranteed. Profitable in the long-term. You can start investing with a small sum of money with Systematic Investment Option.

So you see that if you have a low risk appetite and a limited sum of money to invest, then the best way for you is to go for doing a safe investment. Having said this, you must also realize the fact that a safe investment is not a medium for getting rich in a short span of time. If you want to create wealth and become rich, you have to invariably increase the level of your risk. As we have already seen, there are some investment options which are risky in the short-term actually prove a safe investment in the long run. Doing a safe investment you can protect your principal money as well as generate good returns in the long-term.

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