Smart Strategies for Conservative Investors
Almost everyone is a conservative investor to some degree but if you are always concerned about not losing your hard-earned cash, then you probably fit the mold for a true conservative investor. The good news is that there are sound strategies for conservative investors that can still grow your money—maybe not like a bamboo tree but surely like a solid oak tree.
And there is nothing wrong with saying you are a conservative investor, that you want to leave the risky stock investing to others. When retirement comes, or a rainy day, conservative investors are confident they will have money to meet their future needs.
There are degrees of conservative investing.
- First: totally concerned and committed to just about not risking a penny of your cash but desiring to at least keep even with inflation
- Second: committed to minimal risk of your money but desiring to see it grow a little more than inflation
- Third: conservative in most cases but willing to use a small portion of your cash to grow faster than inflation but not to the extent of taking wild risks
If you fall in the first category, safe investments can be found in:
- bonds, bond ETFs, or bond mutual funds
- some stocks (companies) with a 10-year or longer history of paying strong dividends, ETFs, or mutual funds based on dividend paying stocks
- US treasuries, ETFs, or mutual funds based on treasuries
If you fit the profile for the second category you should invest similarly to those in the first category but put more of your funds into dividend paying stocks, funds, or ETFs. This will enable your portfolio to grow a bit more than inflation as dividend payouts from strong companies are usually greater than inflation and there is also a good likelihood the price of the stock, ETF, or fund is also appreciating.
For those of you in the last category of basically conservative investors, the majority of your portfolio should be invested as if you were in the first category. And like those in category #2 you should hold investments in dividend paying stocks, funds, or ETFs to help grow your portfolio and beat inflation. But this portion of your portfolio should be a strong minority.
Also, if you’re a #3, you should invest directly in stocks, ETFs, or mutual funds based primarily on large companies—called large caps—strong, stable companies whose growth may be slow but sure. Another option is to take a small minority of your money and invest in ETFs or mutual fund sectors representing those portions of the economy that are growing.
Just because your investments are conservative doesn’t mean that once you buy them you should hold on 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 stocks is at 3.5 percent but there is another paying 4.7 percent.
In all situations, it is still important for all conservative investors to keep on top of the market to some degree. You don’t have to watch it daily, but taking a glance every week or for sure every three or four weeks is a good idea.