As Italians, when we have to buy a car, we inform ourselves scrupulously, we ask friends and acquaintances for advice, we entrust ourselves to a trusted mechanic for a general check.
In short, we do everything necessary to choose well and avoid nasty surprises.
When instead we talk about savings and money management, we rely on the first proposal of the bank teller without asking too much and without understand in detail which investment we are choosing.
The truth about safe investments
Let’s get one thing straight: there are no safe investments.
Well yes, it is a truth that you will hardly have heard from financial consultants or promoters.
What is the point of writing an article about safe investments?
The crucial factor that makes an investment suitable or not is the time horizon.
Miracles do not exist, at least in the financial and insurance fields.
Therefore, since return and risk go hand in hand (there is no return without risk), at a time when the interest rates of traditional investments (government bonds and postal savings bonds, for instance) are close to zero, the best way to invest your money is to deal with time available to achieve a particular goal.
The longer the time, the greater the chances of obtaining excellent results without surprises.
The soundness of the bank or insurance company that offers us the investment must then be verified.
Finally, always keep the progress of your investments under control, diversifying the investment and savings solutions that make up your portfolio.
Here are the golden rules for risk-free investing
- Know the types of investments: shares are riskier than bonds, being financial instruments that we participate in the share capital of a company. Bonds are instruments with which whoever signs them becomes a creditor of whoever issues them, the State, company or bank, for a period of time defined in a contract. Mutual funds, on the other hand, collect the savings of multiple investors to use them in multiple financial instruments.
- Knowing how to establish the value of a stock: its price compared to inflation must be taken into considerationits performance and its ability to be easily traded on the market.
- Decide on your investment horizon: if the investment has a limited time dimension, it is better to make low-risk investments, because there will be less time to cover losses with other investments. If times are longer, part of our money can be invested with a higher degree of risk.
- Check your investments: keep yourself constantly informed of the progress of our investments, also dealing with operators other than your trusted bank and not stalling in case of need for intervention.
- Check the soundness of the issuer: it is not said that an investment solution proposed by a historic, or in any case well-known, company is necessarily safe. Getting advice from multiple sources is imperative for the saver and the investor who must always compare the different information.
- Receive the necessary information from the Bank: for each type of investment, the bank must communicate in a simple and transparent manner the type of instrument, the issuer, the listing and trading market, whether there are potential conflicts of interest and what the risk class of the financial instrument is.
- Evaluate risks and rewards: the game is worth the candle? The higher the risk, the higher the possible gain, which does not mean certain or probable. Big gains without risk do not exist.
- Split and diversify investments: it is good practice because the more the types of investment are diversified, between more and less risky securities, the more the risk of capital loss decreases.
There are no safe investments regardless, but choices appropriate to the time profile available.
The more time to allocate to the investment, the better the final result will be.
Article updated on December 27, 2021.