Are you a conservative investor? Almost everyone is to some degree. If you are always concerned about not losing your shirt, or about retaining your hard-earned cash, then you probably fit the mold of a true conservative investor. The good news is that there are sound strategies for conservative investors that still allow them to grow their money, maybe not as fast as a bamboo tree grows, but surely as steadily as a solid oak tree.
There is nothing wrong with saying that you are a conservative investor, that you practice safe investing, and you want to leave the risky stock investing to others. When retirement comes, or on a rainy day, conservative investors are confident they have the money necessary to meet their future needs.
- Totally concerned and committed to not risking a penny of your cash but desiring to at least stay even with inflation.
- Committed to minimal risk of your money but desiring to see it grow a little faster than inflation.
- Conservative in most cases but willing to use a small portion of your cash to grow faster than inflation, but not to the extent that you’re taking wild unnecessary risks.
If you fall in the first category, safe investments can be found in:
- Bonds, bond ETF’s, or bond mutual funds.
- Some stocks (companies) with at least a 10-year history of paying strong dividends, or ETF’s or mutual funds based on dividend-paying stocks.
- US treasuries, or ETF’s, or mutual funds based on treasures.
If you fit the profile for the second category your investments will be similar to those in the first category, but you’ll put more of your funds into dividend-paying stocks, funds, or ETF’s. This will enable your portfolio to grow a bit faster than inflation as dividend payouts from strong companies are usually greater than the inflation rate and there is also a good chance that the price of the stock, ETF, or mutual fund is appreciating.
For those of you in the third category of conservative investors, the majority of your portfolio should be invested as if you were in the first category. Like those in the second category, you should hold investments in dividend-paying stocks, mutual funds, or ETF’s to help grow your portfolio and beat inflation. In your case, this portion of your portfolio should be a strong minority; you should also invest a smaller portion of your cash into strong, reliable companies whose growth is slow but sure. This can be achieved by either investing directly in stocks, ETF’s, or mutual funds based primarily on large companies (called “large caps”).
Another option for those in the third category is to take that small minority of funds and invest in ETF’s or mutual fund sectors that 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 market trends to some degree.
You might ask: Do you have to watch the market daily? No, but taking a glance at the market every week or at the very least, every three or four weeks is a good idea – a personal investment management software can help with this.
Just because your investments are conservative doesn’t mean that once you buy them you should hold on to them 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 is paying positions 3.5% but another is paying 4.7%. These are the times you may want to make some changes.
You can place your own investments, work with an investment advisor, or financial planner, but if you want to do it yourself, I suggest using a investment software program based on technical analysis (and not just rely on charts), because they give you recommendations that can be set to fit these three categories and your particular objectives. By spending a few moments and updating an investment software program every week or even every few weeks, you will keep up with your choices and be able to make changes that protect your money while allowing it to grow as the pace you desire.
Raymond M.F. Dominick is the author of “Invest Safely and Profitably” (Your Success Guide), available from Amazon.