Safe Investing Tools:

The following financial instruments are considered to be safe investing tools:

• Stocks:

Although stocks have the potential of offering the highest return, they are most volatile as far as the possibility of loss is concerned. If you’re an investor, ensure that your portfolio includes stocks in balance to other investments. Based on the amount of risk involved, you can apply a strategy of allocating assets and diversifying investing in proportion to risk. This can help you achieve your target rate of return and lower some of the risks involved in all kinds of investing.

• Bonds:

Bonds are believed to be the one of the safest investing tools. A bond is nothing but a debt security, just as an IOU (I Owe You). When purchasing a bond, you lend your money to a corporation, government, federal agency, municipality or any other entity. The entity that offers you the bond is referred as the ‘issuer.’ After you lend your money, your issuer will furnish you with a bond promising to pay you a specified interest rate during the duration of the bond. The issuer will also repay the face value (principal amount) of the bond after it matures.

Bonds can be a logical and one of the safest investing tools for you if you can’t afford the stock market’s short-term volatility. Bonds can be one of your most ideal safe investing tools if you are looking for shorter-terms return on your investing needs.

Types of bonds that are safe investing tools:

• Government Bonds – Private Sector Bonds
• Registered – Bearer Bonds
• Lottery Bonds
• Premium Bonds – Par Bonds
• Guaranteed – Non-guaranteed Bonds
• Indexed Bonds
• Convertible Bonds (CB)
• Cash Convertible Bonds
• Flat – Floating Rate Bonds
• Preferred Bonds
• Profit-sharing Bonds

 

• Mutual Funds:

A mutual fund is referred as a collective investing strategy that is professionally managed, and  combines money from several investors to invest in bonds, stocks, short-term money market instruments or/ and other securities.

A mutual fund is one of the safest investing tools as it diversifies the investment sum and thus reduces the risk (assuming the investment strategy of the fund managers is well balanced). It allows you to take part in a diversified portfolio for a relatively less amount and usually with lower commissions, compared to buying the individual stocks. It is more transparent and offers more convenience and flexibility.

• Index Funds:

Index Funds are a type of mutual fund or exchange-traded fund that is concerned with replicating the index movements of certain specific financial market. They are a set of ownership rules that are held constant, irrespective of the market conditions.

One of the major advantages of index funds is that their objectives are easy to understand. They involve lower turnovers. Besides, it won’t cost you much to purchase an index fund compared to both mutual fund or direct stock purchase since it is a passive investment tools compared to the active management of the mutual fund. Thus, it can be one of the safest investing tools, assuming the investment horizon is long enough to compensate for the market fluctuations.

• Real Estate:

Property investing is considered to be one of the most risk-free and a safe investing tool, as it is less volatile than shares. It can be your ideal option if you wish to make a long-term investing. Besides, by investing in real estate, you can claim many deductions on your tax return including rates and taxes, interest paid on the loan, repairs and maintenance and insurance. However, housing prices do drop from time to time, so the safe investor will use real estate investments as a way to diversify his portfolio and not to rely solely on them.

Summary

The above safe investing tools involve relatively a low amount of risk and can provide you good returns, assuming you allocate a proper portion of your portfolio to each tool and do not rely too heavily on a single tool.