Conservative investments can be attractive for people who want to generate income or minimize their exposure to stock market volatility. An investor’s who getting closer to retirement, for example, may begin to shift their portfolio toward investments that have a lower risk profile. And even if retirement isn’t on the horizon, holding some conservative investments could provide insulation against losses during a market downturn.
A financial advisor could help you create a financial plan for your investment needs and goals.
Conservative Investing Explained
A conservative investing strategy focuses on preserving capital while generating income through low-risk investments. An investor who leans to the conservative side of the spectrum may be less concerned with growth than they are with maintaining the status quo as far as interest and dividend income are concerned.
Conservative investments typically don’t generate the same level of returns as riskier investments. So there’s a trade-off to be made when choosing a conservative investing style. But you may be less likely to lose money during a market downturn because your portfolio offers less risk exposure overall.
That doesn’t mean conservative investments are entirely risk-free. There may still be some risk involved, depending on the investments you choose. And it’s also important to remember that investing conservatively could make it more difficult to maintain your purchasing power if inflation outpaces returns.
Best Conservative Investments for 2022
There’s no one-size-fits-all solution for determining which investments to choose for a conservative portfolio. Individual goals and risk tolerance must be considered. So what is the most conservative way to invest money? And what should a conservative investor invest in? Here are some potential options for low-risk investing in 2022.
A bond is a type of debt. Investors buy bonds from the bond issuer. The bond issuer pays interest back to investors in exchange for the use of their capital.
Corporate bonds are bonds that are issued by corporations. Some are low-risk; others fall into the high-risk or “junk bond” category. Risk correlates to the bond issuer’s credit ratings. The more likely a bond issuer is to default on interest rate payments, the higher the risk. But junk bonds can also offer some of the highest yields.
Pro tip: Consider corporate bonds with shorter maturities to manage interest rate risk.
Municipal bonds are bonds that are issued by municipal and local governments. For example, a local government might issue these bonds to …….