Risk is always associated with investments. You can never have an investment without any accompanying risk. Aware that risks are part of investments, you want to decrease it while at the same time either keeping or increasing the potential growth of your investments.
Finding investments that give relatively high returns with the smallest amount or minimal amount of risk is hard to do. Such kind of investments are diamonds in the rough and may seem so hard to find. However, if you just know where to look, these kind of investments can be found almost everywhere. It is just a matter of knowing what gives the highest possible yields for your money, and where to find them. Here are some tips on how to find good investments with relatively lesser amount of risk:
1.) Mutual funds – Mutual funds can be considered as one wonder in the world, or at least in the financial world. Mutual funds are very convenient form of investments and is ideal for people who either don’t have the time to monitor their investments or simply doesn’t have the knowledge when it comes to investing.
In mutual funds, a professional fund manager handles the investments in behalf of the investors. The fund manager manages and does the investing including the research and other dirty works of investing. These fund managers are professionals and have extensive knowledge and experience in the field of investing and they are being bounded by rules as well. That significant decreases the risk in investing.
Is it worth taking? Mutual funds give an average return of 12 percent a year based on historical data. A yield of 11 percent is higher than regular deposit rates and the inflation rate. If you invest in mutual funds, you’re getting 12 percent a year for basically doing nothing.
2.) Bonds – Bonds are statements of indebtedness. Governments and huge corporations need capital for their projects and other developments hence they sometimes resort to debt. They borrow money by issuing bonds wherein they agree to pay a fixed interest rate regularly or after a certain period.
Bonds poses less risk because the government and huge corporations can always pay. Just be sure to check the financial capability of the firm that you’re lending your money so you can spare yourself from trouble. Governments are considered to have lower risk because governments have steady flow of income. Corporations, preferably those that are very stable and earning well, are next in line in terms of being risk-free. You can buy bonds through banks and other financial institutions such as mutual fund companies.
Why bonds? Bonds provide a steady stream of income and they are fixed. Though the interest rates of bonds differ, they normally range from 4 to 6 percent. In a market that does well, it can even reach 10 percent. Not bad if you’re a conservative investor.
3.) Land – Land appreciate in time hence you can consider owning a parcel of land if you have lots of cash in hand. Real estate is one of the best ventures you can ever had as long as you have the right location. Location is critical in investing in land because if you have a good location, ROI can be fast and easy.
You can do a lot of things with land. If you’re located in a city, you can lease it or build an establishment on it such as a commercial building. If you’re in a rural area, you can plant on it or even put establishments as well that will cater the needs of the people. If you have lots of capital, you can develop your land into either a commercial space or a residential area.
What’s the downside with land? Before purchasing a piece of land, study it well and fit it to your purpose, or try to find some good use of it. Owning land can be very profitable if done with the right research and strategy, but could also cost you a lot if you oversee things. It is also less liquid compared to stocks and mutual funds hence you may find trouble disposing it if it fails to meet your expectations.
Summing everything up, you must do some research before investing in anything. The best way to mitigate risk is to equip yourself with the necessary knowledge about the investment that you’re planning to venture into. Very successful investors don’t invest blindly. They investigate and see to it that they understand everything before making a move.