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Low Risk Stocks Stocks are a great way to secure your family’s financial future. From braces, to college, to weddings, and retirement you will find a way to pay for these things and a few of life’s unexpected emergencies along the way. For this reason, many people have an inner battle as to whether it is a better idea to invest a little more aggressively or conservatively to get the most for their money. Though these mentioned above carry far fewer risks than some of the more volatile markets in which one could choose to invest.
November 13, 2016
Low Risk Stocks
Stocks are a great way to secure your family’s financial future. From braces, to college, to weddings, and retirement you will find a way to pay for these things and a few of life’s unexpected emergencies along the way.
For this reason, many people have an inner battle as to whether it is a better idea to invest a little more aggressively or conservatively to get the most for their money.
Though these mentioned above carry far fewer risks than some of the more volatile markets in which one could choose to invest.
Another low risk investment for many is to go with childhood favorites such as Hershey, Mattel, GE, and other stocks that have been around for a very long time and have become almost a household name. The longevity of these companies makes them attractive for those looking for long term, low risk investments. They are relatively steady experience growth that often goes hand in hand with inflation. They do not generally experience the roller coaster ride that many stocks on various exchanges may go through so they are not fodder for the manipulations of day traders. They are instead solid investments that while not flashy in their offerings are stable and that is something that low risk investors admire in stocks.
Certificates of deposit (CDs) have been known to offer significantly better rates of returns than many mutual funds and most interest rates for savings plans. If you are going to go the route of a mutual fund you either need to carefully consider how conservative, you want your mutual fund to be (more aggressive funds can make more money than the average CD but you’ll need to carefully consider which will be best for your financial goals) before deciding which is the better option of the two for you.
If you choose to go with mutual funds there are several types from which to choose. You need to decide from the beginning if you prefer a mutual fund that will give you a monthly income now or if you want a mutual fund that is dedicated to slow growth and a constantly increasing value. You will want a mutual fund that pays out a certain amount of money each month as you near retirement. Until then it is in your best interest to avoid those, as there is very little, if any, growth in the value of these funds.
Investing in the stock market is taking a risk. For some people investing in the market is a leap of faith while others are more confident taking baby steps towards their financial goals and future. Whatever type of investor you maybe you will find some value in having at least some mutual funds and lower risks investments included in your portfolio. If you do not have any in your portfolio now, there is no time like the present to include them.
I’m sure you’ve heard how important it is to keep a diverse financial portfolio. There are many reasons for this not the least of which is spreading out the risks as well as the rewards so that one bad day on the market doesn’t do in your entire financial future. Many people have learned along the way that the price to be paid for failing to diversify can be very high indeed. If you aren’t prepared to pay that price, then the solution is probably much simpler than you may realize.
The first thing you need to realize is that there is no perfect solution that is always guaranteed to be a safe investment (there is no such thing as a risk-free investment only those that carry less risk than others). You can minimize the risks by spreading them out between several different stocks, bonds, and funds.
It is important to seek the services of a financial advisor if you can at all afford to do so. In all honesty, you can’t afford to rest your financial future in the hands of an amateur who knows very little if anything about the way the stock market works and how best to structure your portfolio. If for what ever reason you choose to go it alone there are many options available to have a truly diverse portfolio.
The first thing you want to do is divide your holdings between several sectors. This means that when one sector performs poorly you still have the hope that the other sectors won’t share the same fate. During the dot com bust a few years back and the sub prime real estate bust more recently many people learned the hardships that can come about by having too much invested in one industry. Had they spread their investments around a little better many people would not have been hit nearly as hard as they were.
Once you’ve done that you will want to purchase a few stocks, some mutual funds (these are much lower risk funds that are designed to steadily but slowly build value over time), and a few CDs to balance things out. There are all kinds of formulas as to how to do this for maximum effect but the truth of the matter is that you can’t determine the best route for you to take without knowing a little more about your current situation and your goals and plans. Therefore, a financial advisor is so important. Different concentrations of stocks, bonds, and funds are preferable at different stages in your life and per the amount of money you currently have set aside.
Ultimately in diversifying you want to avoid having too great of a concentration in one stock, one sector, and one investment type whenever possible. You never want to rest your entire financial future in one stock, bond, or fund because that is an all or nothing risk and rarely turns out good. If you get nothing else from a financial planner you should consult with one about how to best diversify your investment portfolio. He or she can help you get started along the path to financially planning a brighter future than you may have ever imagined for your family.