The stock market can be intimidating. For many reasons, a person may not want to invest in common stocks due to the fact they don’t have enough capital and cannot stand a market decline if one shall occur. Or they just aren’t knowledgeable enough to be making investments on their own but want to get their money working for them.
There are a plethora of ways to invest your money today, some risky, some extremely safe.
Fortunately, there are a few almost guaranteed investments you can make while you learn the intricacies of the markets or while your fears of a stock market crash simmer down. I’m going to talk about 3 of those methods today.
An Investment In High Grade Bonds
Bonds are often seen as the boring brother of stocks. They have always lagged a little bit behind in terms of investment returns and the thrill of hitting it rich is non-existent. But, that doesn’t mean that bonds don’t play a pivotal role in the portfolios of investors all around the world.
Typically as an investor gets older, they transition their portfolio from mostly stock based investments to mostly bond based investments. Why?
Well, if you are purchasing high grade corporate bonds and treasury bonds, they are all but guaranteed. This reduces potential fluctuations from a stock market crash or correction that could add years to a persons working career that is approaching retirement.
So why are these right for you if you’re hesitant on purchasing stocks or are just learning? Well, you can purchase bonds with a term that is comfortable for you, whether it be 1,3,5 or 20 years down the road. From there you can simply sit back, relax, and earn interest on your investment. There is no checking the stock market daily, no fears of a crash draining your investment account.
Now, you can definitely run into trouble purchasing lower grade bonds to attempt to boost your interest rate. I don’t suggest this at all. These bonds are far from guaranteed, and a company bankruptcy can leave you with absolutely nothing left, a far worse situation than an investment in stocks during a crash.
An Investment In Precious Metals
Precious metals have always been a go to investment when the stock market is faltering, particularly gold. The stock market over the course of the last 100 years has outperformed gold, and more than likely always will. But, in shorter term increments, it is clear that gold can be a very profitable investment while the stock market is falling.
A clear example of this is during the market crash of 1976-78, while the S&P 500 dropped 20%, gold increased in value by over 53%. A more recent example? During the financial crisis of 08, as the S&P 500 was absolutely crushed to the point of a 57% loss, gold was up over 25%.
So how exactly do you buy gold? Well, you can either invest in gold by buying physical jewelry or coins, or you can head to a gold dealer like GoldCore. Be sure to keep a keen eye on fees that these brokerages charge, as they need to turn a profit as well. Finding the brokerage that charges the cheapest commissions on the sale of precious metals is key to gaining the most out of your investment.
Investing In A High Interest Savings Account
This is an investment method that I strongly discourage, but it definitely has its time and place.
A high interest savings account is something you may be interested in investing in if you need easy access to the cash. Think in terms of an emergency fund. If you were to tuck money away in a corporate bond, that money would be inaccessible to you if you ended up needing it right away.
This can cause a lot of problems for someone who doesn’t have any extra money saved up. They may have to pay for that expensive vehicle repair on their credit card that charges 19.99% interest. On a bond that is earning 6%, you’re now paying 14% more in interest than you would be if you had the cash in a HISA that you could just pull out.
You can expect to earn an interest rate of anywhere from 1 to 2.5% in a HISA. But be aware that typically the lower your account balance, the lower your interest rate. Don’t expect to receive anymore than the absolute bare minimum if you bring $1000 to the table.
$50 000? Now they may consider bumping your rate. But at that point I would question why you are even considering placing that amount of capital into a HISA, as it would be much better used elsewhere.
Overall, You Can Never Really Predict The Markets
I understand an investors hesitation when investing in the stock market, especially one who is not fully educated in the markets yet.
But the fact is, you can never really predict when the stock market is going to rise or fall over the short term. The only thing you can know for certain, and this is backed by over a hundred years of analysis, is that the stock market will go up over time.
However, me telling you that probably isn’t going to give you peace of mind. So for that, I hope these 3 investments can help provide you sound investment returns with little to no risk. Although the returns won’t be as high, at least investing in one of these will provide you safety of principle.