Conservative investments can be an important aspect of a well-diversified portfolio, especially as you near or enter retirement.
Conservative investments can serve several purposes. Conservative investing prioritizes preserving the purchasing power of investment capital with the least amount of risk. That’s important as you hit retirement, since you have less time to make up for bear market runs or broader changes in the national economy.
Secondly, they can help you preserve capital – another key benefit for retirees who no longer are earning paychecks and have much shorter investment horizons than younger investors. Lastly, conservative investments may provide a hedge against rising inflation. The tradeoff, of course, is that returns typically are lower than investments that carry a higher degree of risk, such as small-cap stocks.
Below we’ll look at some common investments considered to be on the conservative side of the risk scale; however, investors need to determine which of these investments might be appropriate for their investment strategy.
Conservative investors often are seeking to lower their overall exposure to risk or to preserve capital. They can attempt to reduce risk through a number of investments, including:
The investment classes mentioned above aren’t one-size-fits-all. What constitutes a conservative investment for one investor may pose increased risk for another. Only you can decide which asset classes best meet your definition of conservative and fits within your investment strategy.
1Series I Savings Bonds, Treasury Direct, https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.
Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.
An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Certificates of deposit are insured by the FDIC for up to $250,000 per depositor and offer a fixed rate of return, whereas both the principal and yield of bonds and stocks will fluctuate with market conditions.
U.S. Treasury securities are guaranteed as to the timely payment of principal and interest if held to maturity. Investment options are neither issued nor guaranteed by the U.S. government.