Finding a “safe” investment


Safe investment…it’s definitely an oxymoron, and yet we can’t be blamed for trying to put our money in the safest place possible, while still trying to make it grow. With financial markets in upheaval these days, it’s hard to tell where your money will be safe. That being said, there are several ways to minimize your risks.

Property. This is my personal favorite. Property can be insured, it can be leveraged (meaning the bank takes on a lot of the risk initially), it can produce cashflow, and the tax benefits of owning can be quite significant. Is there risk? Certainly, but as with all risk it can be managed and minimized through intelligent investing. See my factoid on the best US cities to buy real estate in. Note: You can buy property through a 401k, there are some limitations and caveats when doing so. Check with your portfolio manager and accountant to see if this is right for you.


Insured investments. The simplest form of this is a savings account that is FDIC insured. In most situations, this is any savings account under $100,000 (for couples, $250,000), and some money market accounts also have this protection. Is it safe? Definitely. Is it growing? Barely. These days, if you’re getting 3% or more in one of these accounts, you’re doing great. If your tolerance for risk is very low, look for online savings accounts (they generally offer better rates than traditional banks), CDs (which means tying your money up for anywhere from 30 days to 5 years), and Treasury bills (you usually need to meet certain spending minimums for these).

Bonds. Some of these are insured, some are not. People think bonds are generally safe, but corporate bonds can be incredibly risky…even municipal bonds these days may be shaky based on the financial health of the town or city they are issued in. Government bonds don’t produce high returns, but they are insured.

Stocks To minimize risk here, go for dividend-producing stocks (Warren Buffet’s personal favorite), preferably companies with strong track records that are selling low right now simply because the market is in turmoil. Mutual funds can be helpful, but a lot of them charge exorbitant fees…read the fine print carefully.

Your investing should be impersonal. The safest investments are the ones you’re not heavily emotionally tied to. Invest for the long term, people trying to get rich quick are usually not looking at ’safe’ investment vehicles. And finally, the safest way to invest (and a way that is so commonly misunderstood):

Diversify. This DOES NOT mean just owning a lot of different stocks or mutual funds. True diversification means owning property, stocks, commodities, currencies, bonds, business assets, etc etc. This way, one market shift will not destroy your portfolio.

Investing means putting your money at risk, but the equation of risk vs. reward is always different, and if you take the time to think about your investments, you can minimize the former and maximize the latter. This is an ongoing process, the more you think about your money, the more it will grow.

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