7 Best Safe Long-Term Investments
In today’s uncertain economy, investors are seeking security. They can do so with reliable long-term investments to secure and grow their wealth.
There are many opportunities in achieving this. One of the best ways is by putting your money in investments that can weather market volatility, generate reliable income, and preserve the value of your money. At the same time, it’s important to remember that safe investments don't mean risk free.
Safe investments are a great way for investors to preserve their wealth in the long term.
Even if an investment is considered less risky, there are still risks associated with all types of investments. Safe investments are more predictable compared to higher risk, volatile investments. They are securities that provide a sustainable long-term path to consistent returns.
These seven options have a consistent track record of delivering reliable returns while minimizing downside risk.
1. Precious metals
Precious metals such as gold, silver, platinum and palladium have long been regarded as safe, long-term investments. They function as a store of value. Precious metals have maintained their value and purchasing power since their inception. This characteristic is central to precious metals being well regarded as an inflation hedge.
Inevitably, the value of paper currency deteriorates due to rising prices in the economy. In response, investors globally tend to flock to gold to preserve the value of their wealth.
Gold bars and silver bars are a common type of precious metal investment.
Consider that precious metal market prices can experience short term volatility. There can also be extra costs associated with precious metal investments. These include the storage of physical gold and insurance for protection. But in the grand scheme of things, these are prices worth paying. Precious metals can fight against inflation and offer portfolio diversification. They are simply a solid well-rounded investment option that can both protect and incrementally grow your assets.
2. Money market funds
Money market funds are a kind of mutual fund that invests in short-term debt securities that carry minimal credit risk and low volatility. This type of investment is designed to provide stability and preserve capital.
The typical investments in a money market fund are government bonds that have low risk of default, certificates of deposit (CDs), or highly rated corporate debt. The safer quality of these investments is great for those seeking reliable returns.
Investors in money market funds don’t have to worry as much about market fluctuations. Since they’re investing in lower risk, shorter securities, this investment doesn’t experience rapid changes in their market values like you see in stocks. This is a great feature if you’re a more risk-averse investor. This applies to someone who is closer to the age of retirement who doesn’t want to see huge downturns in their portfolio.
3. Treasury bonds
Treasury bonds are issued by the U.S. government. They are considered safe investments that can be held in any long-term investment portfolio. T-bonds are backed by the full faith and credit of the government issuing them. That means the government is legally obligated to repay the bondholders the principal amount and interest payments according to the agreed upon terms. This is why the default risk of Treasury bonds is considered to be very low.
Government bonds are traditional safe haven investments.
Treasury bonds are known for providing a steady stream of income through periodic interest payments. Interest rates on Treasury bonds are fixed at the time of issuance. This ensures a consistent return over the bond’s term, making them an attractive, risk-averse investment option.
Similar to precious metals, Treasury bonds are another great way to preserve purchasing power and hedge against inflation. They provide fixed income that can maintain the value of investor capital over time.
4. High-yield savings accounts
High yield savings accounts make the list as a safe long-term investment for several reasons. First and foremost, these accounts have insurance protection from the Federal Deposit Insurance Corporation. In other words, this type of account is backed by the full faith and credit of the government up to $250,000 per depositor. So, in the event of a bank failure, the FDIC guarantees the safety of deposited funds, which offers a huge protection for account holders.
This is considered low risk investment because high yield savings accounts are backed by financially stable banks. The principal amount in the account is not subject to market risks. Account holders won’t have to worry as much about losing money in a high yield savings account. This is because banks that offer them are subject to regulatory oversight by regulatory authorities. Regulators make sure the soundness of the banking system is intact. This provides another layer of protection for depositors.
Moreover, high yield savings accounts can easily be opened online or it could even be an option at your local bank. Keep in mind that since this kind of account is lower risk, the returns tend to be lower. Therefore, they may not be able to keep up with inflation, which is why investors may balance this account with other investments that yield higher returns.
5. Blue-chip stocks
Blue chip stocks are publicly traded companies that are known for being financially strong. They are established companies that have historically provided valuable stock returns.
Stocks that are considered blue chips are often the largest companies in the world.
Blue chip companies are leaders in their respective industries. They have a track record of stable earnings and are believed by investors to have long-term growth potential. Given these characteristics, investors are confident these stocks can provide them valuable future returns.
Blue chip companies tend to have strong balance sheets, reliable cash flows, and consistent dividend payments. More often than not, they tend to be resilient in different economic cycles both good and bad. Thus they can be resistant to market volatility. There isn’t a single company, however, that is immune to all risks. But overall, blue chips have demonstrated their ability to deliver sustainable growth over time.
6. Exchange-traded funds (ETFs)
Exchange-traded funds (ETFs) are a type of security where investors pool their money in a fund that passively invests in stocks, bonds, or other assets. This investment is one of the best ways to diversify your portfolio. It brings together a collection of different types of assets and offers exposure in a broad range of sectors.
This diversification helps spread the risk to reduce the impact of any individual investment’s performance on the overall portfolio. There are many different kinds of ETFs. This way investors can be widely diversified or more concentrated in a certain sector or industry category according to their preferences and investment goals.
7. Real Estate Investment Trusts (REITs)
Real estate investment trusts, or REITs for short, are another stable long-term investment option. Instead of investing in physical real estate, REITs give investors the opportunity to invest in companies that manage income-producing real estate properties.
An investment in real estate is generally held for the long term.
REITs are also a great way to diversify within the real estate sector. They hold real estate assets across different sectors like residential, commercial, industrial, or health care.
Most importantly, REITs provide long-term investors with consistent cash flow. REITs can be a suitable alternative for investors who want to diversify their investments with real estate but don’t want to bother with all the management and research that goes into real estate properties.
At the same time, it’s important to be aware of the dynamics of the housing market to know how much exposure you should have at a given time.
Takeaway: Manage Risk Over the Long Term
A portfolio with safe investments for the long term provides investors with a foundation of stable and reliable growth over time. There are many ways to organize an investment portfolio that includes securities under this low-risk category.
Of course, these investments are not entirely risk free. Yet they can help reduce downside risk while helping investors reach their financial goals. Understand the characteristics and financial benefits of the securities on this list to make informed decisions about which one(s) to include in your long-term investment portfolio.
Written by Paulina Likos
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