Lately, the stock market has performed somewhat unpredictably. The COVID-19 pandemic has introduced absurd levels of uncertainty, baffling average individual investors and economic experts alike. The market experienced a crash in the early days of the pandemic, only to recover thanks to federal government intervention and rebounding optimism. But is this growth going to last? Or are we in store for an even bigger crash?
Nobody has the answer. Experts are still debating whether the COVID-19 pandemic will be a blip on the radar of long-term economic development, or whether it will be a burden to deal with for the next decade.
If you’re concerned about the uncertainty, and about the volatility of the stock market, you’ll want to shift your portfolio into safer, more reliable investments.
Conservative Investment Ideas
These are some of the best conservative investment ideas for steady, reliable gains—even if the stock market continues fluctuating wildly.
- Blue chip stocks. Just because the stock market is performing unpredictably as a whole doesn’t mean you can’t find solid individual investments there. Look for strong blue chip stocks that are unlikely to be affected by market conditions. Which companies can you imagine lasting for 100 years or more? Which ones seem completely undeterred by economic events? Which ones remain resilient even in economic downturns?
- ETFs and mutual funds. You can also minimize your exposure to risk by investing in exchange traded funds (ETFs) and mutual funds. These investments grant you exposure to many different individual stocks simultaneously, lowering your risk profile. Look for funds in sectors that have high resilience to economic uncertainty, such as utilities, or funds that include a wide variety of different picks.
- Real estate. You can also turn to real estate investing. With real estate, you can make money in a number of different ways, including capitalizing on long-term property appreciation or generating cash flow by collecting rent. Managing a property can be difficult, especially if you’re already devoting your time and energy to a full-time job. However, if you hire a property manager, you can turn this into a passive income source.
- REITs. If you like the idea of investing in real estate, but don’t want to learn about the local markets or time your purchases, you can invest in real estate investment trusts (REITs). REITs trade on the open market, just like stocks and ETFs, but they expose you to the real estate market. They’re a great conservative option for people who don’t want to do much independent research.
- Bonds. Bonds are an old standby when it comes to conservative gains. No bond will be capable of generating the same types of returns as stocks, but you can almost always count on them. Because bonds function like loans, you’ll reliably generate income based on a fixed interest rate, and you can increase your gains slightly by favoring bonds with a higher risk profile (i.e., “junk bonds”). You can also hedge your risk even further by purchasing bond funds that expose you to many types of bonds simultaneously.
- Precious metals. If you’re especially nervous about the future of the stock market, or currencies in general, you might turn to investing in precious metals like gold or silver. You can either buy derivative products that track the prices of precious metals, or you can buy physical precious metals directly. If you pursue the latter, make sure you have somewhere safe to keep them.
- Money market funds. A money market fund is a specialized type of mutual fund that only invests in highly liquid, safe investments. You won’t see much of a return on a money market investment, at least compared to riskier assets, but you can almost guarantee the stability and liquidity of your principal. It’s often used as a way to keep a percentage of your portfolio in “cash” without leaving it in a low interest bank account.
- Certificates of deposit (CDs). You may also invest in certificates of deposit (CDs), which offer higher interest rates than bank accounts. The catch is, you’ll need to render your money inaccessible for a fixed period of time, such as 6 months or 2 years. This strategy is highly reliable, but offers a comparatively low return.
The Importance of Diversification
No matter what, one of your top priorities for stability needs to be portfolio diversification. It’s not enough to pick a single safe asset and pour everything into it; you need a combination of many different assets, working together, if you want to protect yourself. Diversifying your portfolio will shield you from major losses in any one area, and will help you achieve more stability when it comes to generated income and long-term gains.
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