Risk-Averse Investing: Building A Safe Portfolio

Low-risk investments are an essential part of any portfolio. They can help balance your portfolio and shore it up if some investments don't perform as well as expected. Low-risk investments are generally considered safe because your potential for loss is lower than what you might see with other assets. They are ideal for risk-averse investors who prioritise capital preservation and stability over high returns. By incorporating low-risk investments into their portfolios, investors can add diversity and reduce volatility, especially during difficult economic times. Low-risk investments include high-yield savings accounts, money market funds, Treasury securities and bond ETFs.

High-yield savings accounts

Low-risk investments are an essential part of your portfolio, especially if you are a risk-averse investor who prioritises capital preservation and stability over high returns. They can help balance your investment portfolio and shore it up if some investments don't perform as well as expected.

One rule of thumb for a low-risk portfolio is to aim for 60% stocks and 40% bonds. Investment research company Morningstar found that over the past decade, the average annualised return for this type of portfolio is about 10%.

Money market funds

Low-risk investments are an essential part of your portfolio, especially if you are a risk-averse investor who prioritises capital preservation and stability over high returns. They can help balance your portfolio and shore it up if some investments don't perform as well as expected.

Treasury securities

Low-risk investments are an essential part of any portfolio. They are generally considered safe because your potential for loss is lower than what you might see with other assets. These investments are ideal for risk-averse investors who prioritise capital preservation and stability over high returns. By incorporating low-risk investments into their portfolios, investors can add diversity and reduce volatility, especially during difficult economic times.

There are several types of Treasury securities, including Treasury bills, Treasury notes, and Treasury bonds. Treasury bills are short-term securities with maturities ranging from a few days to 52 weeks. They are sold at a discount to their face value and do not pay interest. Treasury notes are intermediate-term securities with maturities ranging from two to 10 years. They pay interest every six months and are issued in $1,000 increments. Treasury bonds are long-term securities with maturities of 10 years or more. They also pay interest every six months and are issued in $1,000 increments.

Stocks and bonds

Low-risk investments are an essential part of a balanced portfolio. They can help shore up your portfolio if some investments don't perform as well as expected. While they often produce smaller returns, they are generally considered safe because your potential for loss is lower than what you might see with other assets.

One rule of thumb is to aim for 60% stocks and 40% bonds. Investment research company Morningstar found that over the past decade, the average annualised return for this type of portfolio is about 10%.

There are also bond ETFs that trade on the market, which are even easier to invest in, such as the Schwab 5-10 Year Corporate Bond ETF (SCHI) or the SPDR Portfolio Corporate Bond ETF (SPBO).

As you get closer to retirement, putting more of your money into lower-risk investments can help you preserve the returns you've earned. Low-risk investments are ideal for short-term saving. High-yield savings accounts and money market accounts can make good homes for your emergency fund. They are also best for conservative investors, retirees and anyone looking to preserve capital while earning a steady income.

Bond ETFs

Low-risk investments are an important part of a balanced portfolio. They can help preserve capital while earning a steady income, and are ideal for risk-averse investors who prioritise capital preservation and stability over high returns. Low-risk investments can also add diversity to a portfolio and reduce volatility, especially during difficult economic times.

One low-risk investment option is bond ETFs, which trade on the market and are easy to invest in. Examples of bond ETFs include the Schwab 5-10 Year Corporate Bond ETF (SCHI) and the SPDR Portfolio Corporate Bond ETF (SPBO).

It's important to note that while bond ETFs are considered low-risk, they are not completely risk-free. The value of a bond ETF can fluctuate with changes in interest rates and the creditworthiness of the bond issuers. Additionally, there is always the risk that the bond issuers could default on their payments. However, compared to other types of investments, bond ETFs are generally considered to be a safer option.

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