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BANKING AND INSURANCE

Lower-risk investment ideas

Lower-risk investment ideas
The Siliconreview
18 October, 2021

Investing is always a risk. Anyone who tells you differently is lying to you. There are no zero-risk investments in the world. However, there are lower-risk investments out there. Certain industries offer the ability to be more resistant to changes in the market, which means that an investment in these industries will have lower risks. On top of this, there is always the added benefit of carrying out research, which will help to mitigate some of the risks of your investment. We’ve taken a look at some of the lowest-risk investment opportunities that are available for investors at the moment.

Government bonds

This is an area that a lot of traders tend to ignore. However, this is a big mistake as the fact remains that government bonds can be an extremely low-risk investment. The main reason for this is that a government bond is essentially the trader lending money to the government with a fixed interest rate return. Why is this such a low-risk investment? The reason is that although the government might not be completely honest in regard to policy sometimes, these are legally backed and the basic fact of the matter is that the government is very unlikely to go bankrupt.

By investing in government bonds, you will have money that is backed by the government. It might not offer a rate of return that can compete with some other investments – for example, there is no stock price to shoot up if the government has a very lucrative period – but making a loss is pretty much guaranteed not to happen. You’ll be able to get a return on your investment that will almost always outstrip what is available at a bank.

Utility companies

Investing in utilities is something that people have traditionally done for a long time. There are two main reasons why investing in utilities is normally a more risk-averse investment. The first reason for this is that utilities are something that people will always need. Water companies, power companies and everything in between are unlikely to ever go away. Obviously, you should look to established companies for your investment in order to mitigate the risk as much as possible, as newer companies on the market won’t have the capital behind them to survive a downturn in the market. This is something that you should look into in order to make sure that you can choose the least risky investment opportunity.

The second main reason why it’s a less risky investment is that most utility companies pay out a good dividend rate. When you invest in a utility company, you’re not looking to invest for a big return on the share price. You’re investing in order to get regular dividends. These can then be used to either re-invest to increase your holding and therefore increase your dividends, or they can be used as disposable income. However you want to use the dividend is completely up to you. These dividend payments are what makes up your return, so make sure to research thoroughly in order to get completely up to speed with the accounts and the likely dividend yield you will get.

Tech companies

This is probably the most risky of the three choices here, but if you carry out the right research, then investing in tech can be one of the most sensible decisions you can make. The reason for this is that tech companies are always just one announcement away from a large jump in the share price and potentially the dividend yield. Investing in the bigger tech companies such as IBM, Tesla or Sony will offer you the ability to increase the value of your portfolio when they make a big announcement.

A great example of this would be when Sony announces a new console. Depending on how successful the announcement is, this can impact on the share price. If the hype for the console is positive before the announcement, then it might be worth investing before it is made. However, if the build-up is looking poor, then it could lead to a drop in share price after the announcement. This is why it’s important to keep an eye on the news and understand what is likely to happen with tech companies. By being aware of what they have ready to be released and the news surrounding them, you can significantly lessen the investment risk just by being aware of what is coming next. This helps to make tech investment one of the least risky investment opportunities on the market.