In order to plan a secure future, it is of great importance to evaluate our savings with the right methods in line with our expectations. We agree that playing video poker demo games is fun, but we need to use our savings for something good: after you win something big, you will be free to play at the best casino online sites, after all. In this respect, we sometimes use our savings to buy a house or land, establish a new business or make financial investments by using different instruments. Any of these can be the right choice for you, according to your needs and expectations.
Today’s economy offers us many financial investment instruments such as precious metals, government bonds, foreign exchange, financing bills, treasury bills, lease certificates, exchange-traded funds, and derivative instruments. These tools are becoming more and more diversified. So, is it possible to evaluate our risks correctly and to manage our savings more accurately in this diversity? What are the low-risk or risk-free investment tools?
What Should We Consider When Choosing Investment Tools?
Ask yourself the following questions to determine the most suitable investment tools for your savings. The answers to these questions will give you an idea about your expectations and your tolerance for risk.
- Is there a secure authority behind the financial investment tool?
- How much risk are you willing to take?
- Will the duration of your investment be short or long?
- Can you easily convert the investment into cash?
- What is the return you expect from the investment?
- How much can you bear for a possible loss on an investment?
How Do We Separate Risky and Risk-Free Investment Tools?
In general, the risk is anything that can cause harm. Therefore, its scope is very wide. Basically, risks are divided into three groups: market risk, credit risk, and operational risk. Market risk includes changes in prices, credit risk covers whether the counterparty fulfills its obligations and operational risk includes inadequate or failed internal processes, people, systems and events.
Financial investment tools may differ from each other in terms of risk. In this regard, tools with very high fluctuations in price are considered risky. The prices of less risky investment tools show smaller fluctuations and less volatility. Therefore, you have to make a choice first: if you want to earn high returns, you have to take high risks. If you reduce the risk you take on, your earning potential will decrease accordingly. Which of these will you choose? For example, while treasury bills and government bonds (which are fixed income securities) are low-risk investment tools, stocks are risky, and derivatives are very risky.
The Most Risk-Free and Low-Risk Investment Tools You Can Invest
Below we describe all possible low-risk investment options.
Mutual Funds are managed by authorized institutions. They consist of capital market instruments such as stocks, bonds/bills, and portfolios consisting of gold and other precious metals in return for the money they collect from investors. Mutual Funds allocate risk to different capital market tools and focus on the best return.
Government Bonds are basically debt papers issued by the government in order to provide periodic financing by requesting a loan from the investor. You can think of government bonds as a risk-free investment tool, since the debtor is the government, and the creditor knows the exact return rate. Government Bonds are put up for sale by the Ministry of Finance with a maturity of at least one and a maximum of 10 years.
Treasury bills are also debt papers issued by the government but with maturities of less than one year. Although you can turn them into cash before maturity, holding your investment in both treasury bills and government bonds until maturity ensures the maximum return and minimizes your risk.
Currently, US treasury bills and government bonds are considered the number one risk-free investment tool by the general public at the global level. Especially the Euro Zone crisis in 2007-09 and later and the increase in global recession expectations from time to time caused most of the investors to perceive these fixed income securities as a safe haven, and this still seems to be the case.
Revenue Partnership Bills
Another low-risk investment tool is Revenue Partnership Bills. These allow you to become a partner in the revenues of public institutions and organizations that provide services such as transportation, energy and communication. Revenue Partnership Bills do not give ownership rights to the owner, they only allow you to receive a share of the income and the dividend to be paid is predetermined.
Contrary to popular belief, real estate investments and cryptocurrencies are not good options. Real estate is an asset where it is highly possible to make a wrong investment, and cryptocurrencies are incredibly volatile. You have the risk of losing your entire investment within a few hours. (Of course, it’s also possible to double your investment.) The same can be said for currency rates: investing in currency exchanges using tools like Forex is also extremely risky. If you want to make a risk-free investment, the options offered by governments will be the best choice.