The Most Conservative Investing Types
You want to make investments, you are the conservative type, but there are so many choices you get confused. We can narrow down some of those choices, and this will make it much easier for you to choose.
The most popular investment vehicle is the stock market. People lose money because they are guided incorrectly or they just don't understand how it works. Lets take a closer look at the conservative investments the stock market offers.
Stock Market Investments
The most conservative investment you can make through a broker is Government Bonds.
Short term notes are called T-Bills, the longer term Government securities are called bonds. Since these securities are backed by the U.S. Government, they are considered as safe as it gets. The problem is your return on investment. In this year, 2011, interest rates are historically low, actually they are so low you need a lot of money just to get back a decent interest income.
If security of your principal investment is the major concern, then Government bonds are the safest and most conservative investment you can make.
Municipal Bonds - These investments are similar to Government bonds with the exception that they are backed by either state obligations or municipalities. A bonds term and rating dictate the interest rate you will get. The rating of the municipality is also a factor in the interest rate calculation. It is rare that a municipality will default on their bonds, just make sure you understand the terms of the investment.
Corporate Bonds - As you might guess, these are bonds backed by a corporation. These are also a conservative investment, but there is a thing called "Junk Bonds". A good quality corporate bond will pay a few percentage points above Government bonds, but not as wide as junk bonds would pay.
For example: If a Government bond is paying 2 percent, then a Corporate bond might pay 4 percent. If you find a bond paying 12 to 14 percent, you better look real close because this will not be a conservative investment.
Even a good corporate bond will require that you do some research on that company. Remember: in the case of corporations, just because it is a bond doesn't mean it is a rock solid investment.
Time Deposits - You can buy time deposits (CD's) through a bank or your broker account. These investments are very conservative because of two things. The backing of the institution itself and the FDIC, but like Government bonds the interest rates are extremely low for the time commitment.
Bank Offerings
As mentioned, your broker can offer a variety of time deposits from various banks, but some banks also have offers they do not pass on to brokers.
Banks don't offer risky investments, so you can sleep easy when you invest in one of their instruments.
E Bonds - These are Government backed, but commonly issued by a bank. Basically, you buy a bond, $25.00, and in 7 years it is worth $50.00. A lot of people buy these, put them away and forget about them.
For the conservative investor there is a wide range of choices. The real decision is, how long do you want to tie your money up for? If inflation hits interest rates will go up.