Investment Articles

U.S. Treasuries are considered one of the safest investments in the world. Why? Just take a look at the yield on the 10 year bond; despite the deadlock in Washington and the media induced fear that the U.S. may default on its debts, the world still believes that the U.S. will not renege on its debt. As a matter of fact, while the stock market declined recently because of inaction in Washington, the yield on the 10-year bond actually dipped below 3 percent (when investors buy Treasuries, the yield goes down). Because U.S. Treasuries are perceived to be risk-free, they are used as a bellwether for other bonds as well. Corporate and municipal bonds are compared to U.S. Treasuries to assess their risk; when the interest rate between a non-Treasury bond and a Treasury bond is wide (also known as spread), the Treasury bond is considered riskier, and vise versa. But just because the U.S. Treasury is assumed to be default proof, it does not necessarily mean that it is risk free. While default risk is important to consider, investors must also recognize that bonds exhibit other risks beyond default risk. Below is a list of the different types of bond risks investors should be aware of.

Default risk – is the risk the borrower (U.S. government, municipality, or a corporation) will not make interest payments as promised. Investors perceive U.S. Treasuries to be default proof because they believe the U.S. will always pay its obligations. Many investors falsely believe that municipalities are also default proof, but in 1994, Orange County, California defaulted on its debts.

Interest rate risk – is the risk that interest rates will change after issuance. For example, assume an investor buys a 10 year bond for $1,000 paying 4 percent annually, which means the investor will receive $40 per year for 10 years. The investor is exposed to interest rate risk because if interest rates increase, the investor will still receive $40, but the price of the bond will decline because no one would want to pay $1,000 for a bond paying 4 percent when the market interest rate is higher than 4 percent; the reverse is true if interest rates decline. The change in the price of the bond given a change in interest rates is measured using a term called duration.

Reinvestment risk – Continuing with the same example from above, as the investor receives $40 in interest payments every year, it is assumed that he/she will reinvest that interest payment at prevailing market rates. If prevailing market interest rates are below 4 percent, the investor is exposed to reinvestment risk because they will reinvest those payments at lower rates.

Liquidity risk – Liquidity is the ability to buy or sell an investment quickly without difficulty. Bonds do not trade the same way as do stocks. Whereas stocks are easily traded throughout the day on an exchange where there are usually thousands, if not millions of shares traded in a single day, bonds (except for U.S. Treasuries) are traded through bond dealers where trades occur much less frequently. This infrequency of trading within the bond market leads to stale prices and liquidity risk.

Spread risk – As mentioned in the opening, U.S. Treasuries are used as a bellwether for other bonds, and a bond’s riskiness is measured by the spread between its yield and that of a comparable Treasury. Hence, spread risk is the risk that the bond’s yield will widen against that of a comparable Treasury; the wider the spread, the greater the risk of the bond.

Downgrade risk – Bonds are rated by major credit rating agencies, despite whether investors still trust the rating agencies given the Mortgage Backed Security debacle. Nevertheless, bond ratings are important for many investors, especially institutional investors such as banks, endowments, pensions, etc. Such institutions have policies that prohibit them from owning low grade bonds, so they rely on the ratings to screen bonds. Downgrade risk is the risk that a bond will be downgraded by one or more of the credit rating agencies and lead to a sell off among those bonds.

I identified six risks of investing in bonds. However, there are additional risks that apply to complex bonds as well. When bonds have more unique features such as calls, puts, zero coupons, etc., the risks multiply. Many investors wrongly assume that if they invest in a bond and hold it to maturity, that they are not taking any risk. But as you can see from the various risks identified above, investors must be aware of the complexities associated with investing in bonds, and learn how to manage those risks.

ACap Asset Management is a Fee-Only financial advisory firm providing comprehensive financial advice specifically tailored for doctors’ needs.

Ara can be reached at aoghoorian@acapam.com, on the web at http://www.acapam.com, or on Facebook by searching ACap Asset Management.

In a previous article “Are Your Emotions Costing You Money,” I examined traditional and behavioral finance theories, and identified several biases that interfere with investors’ ability to make sound investment decisions. In this article we delve deeper into each of the biases, and explore simple, yet effective ways to overcome those biases. While there are a multitude of behavioral biases, this article will focus on three: mental accounting, anchoring, and overconfidence.

Mental Accounting – is the process whereby investors categorize their assets into separate mental “buckets”, and thus spend or allocate funds differently. Some examples: Susan receives a monetary gift for her birthday and uses it to go out for a gourmet dinner; Bill allocates his year-end bonus for Christmas presents; upon receiving his tax refund, Sam takes a vacation he hadn’t built in to his regular budget. Research corroborates these examples; people do tend to spend their tax refunds differently than they spend their normal wages. Interestingly, in the past several years surveys show that Americans are spending their tax refunds to pay down debt in an effort to deleverage their household balance sheets. When investors practice mental accounting such as those in the examples above, they tend to view and assess individual assets separately instead of as a part of a total portfolio.

Anchoring – is when an investor latches on to the first bit of information they receive and is unwilling to accept new information. Assume John purchased a home for $500,000 at the peak of the market and is now trying to sell his home in a depressed real estate market; he would be reluctant to list or sell his home for less than $500,000 because he is emotionally anchored to that “value” for his home. When investors exhibit the anchoring bias, they are unwilling to accept new information that is contrary to their the view that his home is worth $500,000 when it fact it might be worth much less. The risk here is that because John is anchored to his price, he may not be able to sell his home in a timely manner, which in-turn may have detrimental affects on his finances and portfolio, not to mention the possibility that the home value could decrease even further.

Overconfidence – Investors who are overconfident overestimate their ability to analyze data. Suppose Jane made some money on Cisco stock, she would begin to believe that she has a keen ability to identify all upward trending technology stocks. As a result, Jane would begin to buy more and more technology stocks, and thus her portfolio would become less diversified – diversification is one of the cornerstones of a balanced portfolio. Additionally, investors who are overconfident tend to not only have more concentrated portfolios, but also trade more frequently because they have an illusion of control that they can sell or buy at the “right time”. Many investors who exhibited the overconfidence bias during the dot-com era and the subsequent real estate boom, found themselves to be overexposed when that sector had a sharp reversal, and as a result lost most of their assets and wealth.

Overcoming Biases

As you have read, an investor’s emotions can have detrimental effects not only on his/her portfolio, but also on stress level. The good news is that there are ways to significantly reduce these effects. Here are five things you can do right now to avoid some common behavioral biases.

1. Stop watching the daily news. News networks draw ratings by evoking viewer emotions; TV is meant to incite not inform. Watching news every day causes investors to react emotionally, rather than analytically and strategically.

2. Don’t look at your portfolio everyday. Investors who check their portfolios every day tend to trade more frequently and take on more risk.

3. Don’t fall subject to the anchoring trap. Read contradictory news. Actively seek news stories that differ from your viewpoint, and give them equal weight.

4. When evaluating investments, don’t just look at the risk and return characteristics of that individual investment. Rather, analyze how that particular investment will impact your total portfolio, and determine whether it will enhance your total return, minimize risk, or both.

5. Lastly, work with a Fee-Only financial advisor to develop a sound financial plan that is specific to your needs. Remember that investing is a long term endeavor, so stick to that plan!

Behavioral finance is a relatively new field of study and academics are continuously researching new relationships between investor emotions and their finances. While financial experts have identified a multitude of investor biases, the three detailed above have the most acute consequences, and yet can be overcome when investors are willing to slightly change their habits.

ACap Asset Management is a Fee-Only financial advisory firm providing comprehensive financial advice specifically tailored for doctors’ needs.

Ara can be reached at aoghoorian@acapam.com, on the web at http://www.acapam.com, or on Facebook by searching ACap Asset Management.

The best time to plan your best investment strategy and pick the best funds for 2012 is now, because last year’s investment strategy and best funds could put you in the poor house by year end 2012. There’s a rocky road ahead for stocks and bonds, and you’ll need a new strategy and the right funds to keep your investment portfolio balanced and out of serious trouble.

For the average investor the best investment strategy will still revolve around bond funds and stock funds in 2012, but the focus will change. The best bond funds will be more defensive, and the best stock funds will be more conservative and income oriented. The USA and much of the free world is facing heavy debt problems on the one hand and slow economic growth one the other. Defense is the name of the game going forward. If you can sidestep heavy losses now and throughout 2012: you will be in a position to step up to the plate when the dust finally settles.

The best bond fund investment strategy is to hold SHORTER-TERM high quality CORPORATE bond funds – and NOT long-term funds that invest primarily in government securities. If interest rates take off long term bonds will fall substantially in value. A mutual fund holding issues that mature in about 5 years will be hurt much less than one that holds long term maturities of 20+ years. That’s not a guess. That’s how the bond market reacts to rising interest rates. I suggest going with corporate vs. government bond funds for two reasons. First, corporate bond issues pay higher interest than U.S. Treasury notes and bonds. Second, corporate America is in excellent financial shape vs. the U.S. government.

The best investment strategy in the stock department is to avoid or sell equity (stock) funds that invest heavily in growth and/or small-company stocks. These often pay little or no dividend income to investors, and in a volatile and declining stock market these funds can get clobbered. The best stock funds for 2012 will be EQIUTY INCOME large-cap funds that invest in high-quality major corporations with excellent records for paying above average dividend yields. A 2% to 3% dividend income might not make you rich, but a steady reliable income stream from America’s highest quality companies tends to cushion portfolio losses in a bad stock market.

Over the past several years I have included owning gold, gold stocks and gold funds as part of my recommended best investment strategy. For 2012 I no longer include gold in my investment strategy, primarily because gold’s price has become extremely inflated over the past few years. Gold has become more of a speculation than a hedge against inflation or disaster. Instead of holding gold I would suggest putting some of your investment dollars in an insured account at your local bank. Sometimes cash is king, especially when interest rates are extremely low and rising. Money market funds are the best funds for safety. When rates move up they should become quite attractive as a safe haven for investors.

Both the best stock funds and best bond funds for 2012 will be defensive in nature. They will also have something else in common… a low cost of investing. Keeping costs low is always an ingredient in the best investment strategy for average investors. Invest in low-cost no-load INDEX funds whenever possible to automatically increase your total returns by 1%, 2% or more year in and year out. That might not sound like much, unless you consider that you haven’t been able to earn 2% in safe liquid investments for the past few years.

In summary, your best investment strategy for 2012 and going forward: an even split between relatively short-term corporate bond funds and high quality large-cap equity- income funds. The best bond funds and best stock funds in these categories will be low cost no-load (no sales charges) INDEX funds with low yearly expense ratios. The best safe investments may be found by shopping local banks or credit unions until interest rates really take off. After that the best safe investment will likely be money market mutual funds.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

It’s no surprise that the rates of private number plates are on the increase, with the amount of infallible, incredible cars being produced in our modern society. With these personal products once being a tradition for luxury vehicles, it is becoming more common for people to represent themselves, a company or industry upon their vehicle. It is therefore, no further surprise that people wish to add the cherry to the top of their cake with a private and unique number plate to their car. With such high desire and demand, wide audience and high market; investing in private number plates could be the cherry added to your cake of business.

Many private number plate companies try to enable investment in this sector to be as simple and applicable as possible. With a few simple steps and tips, you can be well on your way to a very successful alternative investment. As the audience in this certain investment is wide, you are almost assured to always have a customer. From teenagers who have just passed their driving test, males, females, adults, businesses and companies and many more; the lisence plates may vary but can apply to many. A tip in investing personal or private lisence plates is to invest in those that seem fairly common, such as names and numbers.

Another path into investing private number plates for customers is to receive the desired plate by the individual and then hit an online search engine. Many private number plate companies behold ‘quick private number plate searches’ in which portrays as to whether that specific number is available or not. Names of individuals or companies, addresses, numbers and even initials can be entered into these searches as criteria. The plates will then be offered, which can then be referred to the customer and they can take their choice of the plate they think fits best. Purchase options are also available online, where there is a choice for you to have a free transfer service or to do a self transfer with a certificate which the customer can then take to their local DVLA office.

An alternative to this is to use the DVLA as your main buyer. This shares its advantages and disadvantages, such as the DVLA being well known and trustworthy but also possibly lacking the numbers and letters desired. If the plate you covet to purchase is not available directly from the DVLA however, Cherished Number Plate Dealers may be your answer. Here, more websites and search engines shall appear for you to do your ‘quick private number plate search’ as stated above.

Buying from reputable suppliers is also important for the best results in your investment. There are three main number plate dealer associations; The Association of Personalised Registration Traders (APRT), The Cherished Numbers Dealers Association (CNDA) & Members of the Institute of Registration Agents & Dealers (MIRAD). All of these associations willingly offer help to any possible or certain investors. There are other dealers that you can get involved in, but levels of professionalism can vary. This does not however lower the individual dealers; it just means that it could be considered a question as to whether they wish not to be a member with a trade organisation.

This is beginning to prove to be a safe investment, whether for mid-term or long-term periods of time; with share prices falling and an increased demand for the product. The biggest tip that can be given is that the investment should of course be researched so that you can find for the right path which suits your needs and availability.

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Can you always find a winning investment? What about when the markets are in turmoil either from economic forces, nature’s disasters or political forces?

The answer depends upon two factors: how you define “winning”, and when you want the stock, ETF or fund to produce gains.

When the markets are in turmoil and almost everything is dropping there may be safe havens that can be defined as winning investments. These include: bonds (or bond ETFs and bond funds), money market cash accounts, and high yield dividend paying stocks, funds or ETFs with trong long-term history of always paying their dividends. Winning investments in these situations can also be based on the concept of buying low with the idea of holding the position for a mid to long term measured in years, not days, weeks or months.

While most software programs that provide buy – sell recommendations are based on immediate trends there are a few programs that allow you the option of configuring them so you can pick long term investments or safe investments. You can do this in a variety of ways. One method would be to include a few “safe” type positions in your regular groups so that when most ETFs, stocks or funds are underperforming the analysis will shift towards these safer positions that will then reduce risk while offering modest gains.

Another method would be to create a group of high dividend yielding investments, either stocks themselves or ETFs or mutual funds. By setting the buy rules based on long term investing you would reduce turnover and volatility while maintaining minimum risk with modest gains or income.

Fundamental analysis can also be used to find long term investments. This is the method used by Warren Buffet. This method requires careful study of potential positions over many days and weeks before a buy decision is reached. When the markets are down or in turmoil such analysis coupled with the willingness to reap results in the distant future can bring excellent gains.

Who can best utilize these approaches?

Everyone. Some investors think these approaches don’t apply to them because they want to make money “today” or because they are either nearing retirement or are retired. But when the markets are convoluted putting pat of your portfolio into safe areas is simply a way to reduce risk and maintain your portfolio’s value. Retirees today need to remember that life expectancy is growing and keeping a vibrant portfolio with long term potential is critical.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana.

View his software at: http://www.dynamicinvestorpro.com

Buying Artwork is often considered to be the exclusive privilege of the rich and there is plenty of evidence to prove this with record sales making headlines the world over. Van Gogh’s sunflowers famously selling for $39.7million back in 1987 is just one example. With the current economic crisis casting a long shadow of financial insecurity for the foreseeable future, more people are looking for tangible alternatives in which to invest their hard-earned money. Buying art is one such alternative, but can it really be a safe investment? Is there a science to making it profitable or is it all just an indulgent matter of the heart? Here are four simple points to consider when buying art, whether for £50 or £50,000.

Chose a discipline

Art doesn’t have to be just fine art: i.e. paint on a canvas. No one can doubt the craftsmanship and art that is required to cut a diamond or carve a fine dining chair from a piece of wood so why not consider buying furniture (such as Chippendale) or sculpture, or more personal items such as antique glass, silver and jewellery? These items may have a broader range of price too enabling investors to start small and grow their collection over time. One collector bought for his daughter, on the occasion of her birthday each year, an antique silver spoon. In time, she learnt to love the subject too and began to compliment the gifts with her own purchases and built up an impressive, and highly valuable, collection.

Research your subject matter

Knowing your subject matter is vital and there is a wealth of information available ranging from the local library for the more academic research to the internet for information on recent sales. An auction house will produce a catalogue for each sale and these are useful points of reference as they will record each piece’s provenance (history). A quirky history, such as a famous owner in the past, will add value to a piece, regardless of what it is.

Study the market

Knowing the current market for your particular discipline is as important as knowing the provenance of a piece itself. The internet, again, is key and regular attendance at auction sales will help you to gauge who shares your interest in a particular style or genre as well as give you a guide to what pieces are selling for. Don’t forget that an auction price is not necessarily indicative of a piece’s value: demand may have pushed the price up.

Seek expert advice

Auction Houses are where most people think to buy art and antiques but antique dealers are just as knowledgeable and are part of a useful network. If the piece you coveted sold to someone else at an auction, why not go to a dealer and ask them to source something similar: by the same artist or craftsman, or simply in the same style. A reputable dealer will be a member of a professional trade association, such as BADA (British Antique Dealers’ Association) who will offer an independent arbitration service if you are not completely happy with your purchase.

Like any investment, the value of a piece of art or an antique can go down as well as up. But with careful research coupled with the advice of a professional, there is no reason why anyone should not be able to buy something with a potential return. If you are able to buy multiple pieces, think about how they can complement each other and if you would sell them on as a group rather than individual pieces. Think too on what links the pieces of a collection: are they all examples of one particular style, or differing styles executed by the same artist or craftsman. When you have carefully considered, weighed up and evaluated all this information, you may decide to go with the other piece of advice many art market professionals expound: go with your heart: if you can afford it and you love it, you should buy it, as you can never put a value on the enjoyment you will have from it. So why not do both? Use your heart and your mind: you will get something that you will treasure and it may even turn out to be a treasure.

To be really basic there are pretty much just a few different types of mainstream investments. They are stocks or shares, property, bonds and cash. Now if you haven’t done any investing before I may have just terrified you. Just try to remember that most things in life sound complicated or confusing when you first start learning about them.

OK, so when we look a bit deeper into it, there are quite a few sub-categories for each kind of investment. And each area of investing comes with its own challenges, positives, negatives and quite a steep learning curve as well.

The good news is, that when you are a new investor you will probably start out slowly and so you’ll learn about each type of investment as you’re ready to “play” with them.

The next question to ask yourself is “What type of investor am I?” Most people will fit into one of these categories and either be a conservative, middle of the range or an aggressive investor. And you may find that once you have some experience in investing, your style of investing may change also. Particular types of investments also usually fit into one of two categories – high risk or low risk.

The share market can be very intimidating for those new to investing and I recommend getting some other investing experience before tackling this type of investing.

Many people start their investment journey as conservative investors and will most often invest in cash-type investments. What I mean by this is that they invest their money in very conservative financial vehicles, such as interest bearing accounts at a bank, mutual funds, retirement funds, Government-backed bonds, and Certificates of Deposit. These are very safe investments that grow over a long period of time. These are also low risk investments in a way, but often don’t even keep up with inflation. It also means you are relying on other people to invest your money wisely and that you have absolutely no control over it.

Modest investors are still fairly conservative and will often invest a good part of their portfolio in cash investment products, while at the same time some may try their hand in the stock market, others may purchase property and most moderate risk investors will be looking at low to moderate risk investments.

The more aggressive investors generally do a lot of their investing in the stock market, which can be quite a volatile market. If you plan to get into share trading I strongly suggest doing at least one course that has been recommended to you by someone you trust and then to paper-trade (practice trading – real trades, but without actually buying them) for at least six months. Aggressive investors will look at business ventures along with higher risk property deals and are often will to put the larger part of their portfolio in higher risk opportunities.

So let’s say you’re an aggressive investor and you find an older apartment building. You would plan to invest even more money renovating the property, which can be risky if you have not calculated all the outcomes correctly. You would invest this way because you anticipate being able to increase the rental fees for each apartment or perhaps you were looking to flip the property for a net profit. This can be very lucrative and it can also cause bankruptcy. Usually it comes down to how well you do your homework and how much experience you have.

Property in any given area tends to go through cycles, so again you need to be educated before you jump into any “deals of a lifetime”, especially if everyone is jumping in at the same time. Usually by that time all the real deals have been snapped up by the savvy investors and you are looking at the peak of the cycle, just before it starts to decline. I will go into cycle details in much more depth in future posts. Oh, and it’s not just property that has cycles – just something that you should be aware of.

If you’re seriously considering investing you first need to decide what risk level you are comfortable with and how much money you have to start out with. Seriously, there are very few people who get rich working for someone else, so you’re on the right track, because you’re going to look after your own money way better than anyone else in the long run. Just remember – especially when you’re starting out – that any money you plan to invest, you must be comfortable with the idea of losing it. You mustn’t invest with money you can’t afford to lose.

Julie started investing from an early age, owning her own 7 days a week business at 18 years old, and has continued throughout her life to educate herself on multiple investment strategies. Her main focus has been residential property investing. She has owned multiple rental properties, renovated 11 homes, performed sub-divisions, bought off the plan, been successful with property options and now lives on over 110 acres in rural South Australia. While she leans toward property investments, she has also educated herself with many other investment vehicles and encourages others to do the same. Looking into a variety of investments can help you decide what investing strategies are a good fit for you.

Jack and Mike were at a party in 2011 and the chatter was about investing money and where to invest it. Jack whined about interest rates, and Mike agreed that investing money in the bank was a lost cause. Assuming they both preferred relatively safe investments, a stranger overhearing this suggested they invest in safe mutual funds.

Investing money in mutual funds was on Mike’s list of where not to invest because he had lost a bundle in stock funds during the financial crisis. Jack wasn’t too fond of funds either, since his safe mutual funds (money market funds) were paying MUCH less than 1% in interest. Both felt clueless and uncomfortable as the stranger rattled on about a type of fund. According to mister know-it-all, you could invest in a relatively low risk fund, earn higher returns than at the bank… and just relax.

As they walked away from their new acquaintance Mike suggested that Jack ask his brother Jim (who knew about this stuff) what the devil the guy was talking about. Jim, as usual, had an answer. Can you invest in one single relatively safe fund in 2011 and have exposure to stocks, bonds and safe investments all in one package with relatively low risk at relatively low cost? Can investing money in 2011 and into the future be that simple? Yes it can, in a NO-LOAD balanced fund called a Retirement Income Fund.

Here’s how investing money in these balanced funds works. Let’s say you invest $10,000 in a retirement income fund with a major no-load fund company like Vanguard or Fidelity, the two largest fund companies in America. It should cost you nothing for sales charges when you invest and about $100 a year (or less) for management and other fund expenses. This money will automatically be deducted from the value of the fund shares you own. No-load means no sales charges when you invest or cash in shares.

Now, where is your money actually invested in these relatively safe mutual funds? About 20% will be invested in a variety of stock funds managed by the fund company. This provides you with some growth potential plus dividend income. The rest of your money will be split about evenly between bond funds and safer short-term funds managed by the company, both of which earn interest. The dividend and interest income earned are normally automatically reinvested for you – to buy more shares in the retirement income fund that you own shares in.

Investing money always involves risk and the value of your shares will fluctuate. The good news is that when you invest in a retirement income fund risk is relatively low, and you will own a small part of a large well diversified portfolio. No one knows what the future will bring in 2011, 2012 and beyond. Broad diversification in relatively safe mutual funds makes good sense for most people.

If you feel clueless and are safety conscious like Jack and Mike, consider investing money in a retirement income fund. Let the professional money managers do the managing while you relax in 2011 and beyond. You won’t get ahead with all of your money in the bank, so start investing with relatively safe mutual funds.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

Are you a conservative investor? Almost everyone is to some degree but if you are always concerned about not losing, about retaining your hard-earned cash, then you probably fit the mold for a true conservative investor. The good news is that there are sound strategies for conservative investors that can still grow your money, maybe not like a bamboo tree but surely like a solid oak tree.

And there is nothing wrong with saying you are conservative investor, that you want to leave the risky stock investing to others. When retirement comes, or a rainy day, conservative investors are confident they have money to meet their future needs.

There are degrees of conservative investing and it is important to recognize where you stand. These degrees include:

1. Totally concerned and committed to just about not risking a penny of your cash but desiring to at least keep even with inflation.
2. Committed to minimal risk of your money but desiring to see it grow a little more than inflation.
3. Conservative in most cases but willing to use a small portion of your cash to grow faster than inflation but not to the extent of taking wild risks.

If you fall in the #1 category, safe investments can be found:

• Bonds, bond ETFs or bond mutual funds
• Some stocks (companies) with a 10 year or longer history of paying strong dividends, ETFs or mutual funds based on dividend paying stocks
• US treasuries, ETFs or mutual funds based on treasuries

If you fit the profile for the #2 category you should invest similarly to those in the #1 category but put more of your funds into dividend paying stocks, funds or ETFs. This will enable your portfolio to grow a bit more than inflation as dividend payouts from strong companies are usually greater than inflation and there is also a good likelihood the price of the stock or ETF or fund is also appreciating.

For those of you in the #3 category of basically conservative investors, the majority of your portfolio should be invested as if you were in category #1. But like those in category #2 you should hold investments in dividend paying stocks, funds or ETFs to help grow your portfolio and beat inflation, but in your case this portion of your portfolio should be a strong minority.

You should also invest a smaller minority of your cash into strong, stable companies whose growth may be slow but sure. This can be achieved by either investing directly in stocks or ETFs or mutual funds based primarily on large companies (called large caps).

Another option for those in category #3 is to take that small minority of funds and invest in ETFs or mutual fund sectors which represent those portions of the economy that are growing.

In all situations, for all conservative investors it is still important that you keep on top of the market to some degree. Do you have to watch it daily? No, but taking a glance every week or for sure every three or four weeks is a good idea.

Just because your investments are conservative doesn’t mean that once you buy them you should hold on forever. Situations change and you may need to make adjustments. For example, you may want to switch from long-term bonds to short or mid-term bonds. Or maybe one of your dividend paying stocks is paying 3.5% but there is another paying 4.7%.

You can place your investments yourself; work with an investment advisor firm, or a financial planner. If you want to do it yourself, I would suggest using a software program based on technical analysis, not necessarily just charts, which gives you recommendations that can be set to fit these three categories and your particular objectives. By spending a few moments and updating such a software program every week or few weeks you will keep up with your choices and be able to make changes that protect your money while allowing it to grow at the pace you desire.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana.

View his software at: http://www.dynamicinvestorpro.com

A well-planned investment always gives excellent returns over the years. Investing should be done for at least a period of five years and having a clear long-term plan is needed. A lot of people expect quick returns on their money and end up investing in risky investment options instead of the safe investments.

Safe Investment Options

Bank Saving Schemes

Bank saving schemes is one of the most popular amongst all the safe investment options. With bank saving schemes, the chances the money spent being misused are reduced compared to other forms of investment. Most importantly, it gives an attractive interest which is a requirement of liquid money for use when needed.

Gold

Gold would be the best investment as well as a safe investment. The prices of gold are based on the market situations. Buying gold at a lower price would give bigger profits at maximum levels when the demand for gold in the market is at its peak. Buying gold in electronic form is better than purchasing gold in the physical form. It is necessary to seek help and advice from gold traders and dealers to know more about its prices and make profitable investments.

Bonds

Bonds are one of the safe investments to consider because of its stable returns year after year. Bonds issued by public companies, as well as private companies, provide decent returns, regardless of the situation of the economy and markets. Ideally, one should prefer reputable government run companies for bond investments. Bonds are the loans advanced to corporations by the investors. Therefore, bonds would be safer form of investment compared to other forms of ventures.

Residential Real Estate

Residential real estate is also a sound venture because of the attractive prices of houses and properties. With the economy showing steady growth recently, buyers are starting to purchase homes. This can start an upward trending in the real estate prices. Investment in residential lots is also predicted to yield superior returns on investment in a later time to come. Benefits from residential real estate investment are expected to be in five to seven years.

Mutual Funds

Mutual funds are one of the save investments considering the variety of options investors get here. Large cap diversified mutual funds offers safety and steady growth of the investments. Several mutual funds give as high as twenty-two percent return on investments. Prior to investing, it is best to conduct a thorough research, so that one can choose the correct mutual funds companies.

For most of the first-time investors, the safe investment options would be the appropriate choice. As one starts to gain profits, investing in risky investment options would follow depending on one’s comfort and choice.