The euro crisis, inflation, the debt crisis, a weak American economy, these are not easy years for investors: financial products are either risky or the returns barely compensate for inflation. If you don’t want to lose money, you have to choose the right mix.
Invest safely by spreading risks
No one can predict what the future will bring financially:
- will Italy continue its austerity measures?
- or will the US follow a hard consolidation course and slow down the economy?
The financial world is full of unanswered questions. In any case, investing in multiple categories can significantly reduce the risks.
What is a right investment mix?
It is important to spread savings across multiple sectors. After all, in a crisis all sectors are never hit equally hard. If one sector loses, the other often fares less badly. But what is the right mix?
- what should not be missing from an investment portfolio?
- and which investment categories should one avoid?
Government bonds out of favour
The image of government bonds in particular has suffered a serious blow due to the debt crisis:
- Bonds from crisis countries are considered poison for an investment portfolio;
- and there is little interest in Dutch, German and Danish bonds from a return perspective.
Government bonds, bond funds and savings accounts have always been considered safe investments. Nowadays, however, they hardly yield any returns. A safe component in a contemporary portfolio is more likely to be a good-interest deposit account, for example with an internet bank or a direct bank.
Only diversification can save investors
Spread is okay, but don’t lose sight of the economic conditions. Because we have entered a climate of structural expropriation of savers due to inflation. After all, many investments barely yield enough to compensate for inflation. Everything that has been considered gilt-edged so far is only generating losses at this point.
Rising inflation inevitable
In Europe, little will change for the better in the near future. We have to assume that the Euro crisis will drag on for another two to three years without much change in the script. And on top of that are the high Japanese and American debts. Whichever way you look at it, inflation must in any case be taken into account. Fearing losses, investors in 2012 bought just about anything that mentioned safety. Not only countries such as Germany that were considered safe benefited from this, but also German companies. The malaise in government bonds also spread to good bonds issued by the business community. Attractive interest rates are hardly available from solid companies. And it is better not to burn your fingers on high-interest loans from small and medium-sized companies, analysts advise. Many of these companies are small and highly speculative in terms of investment.
The risk of total loss
Consumer organizations also warn against buying corporate bonds. It cannot be recommended to private investors. Without sufficient spread across different sectors, the risk of total loss is not unthinkable. This also applies if the creditworthiness of the company is good. Because problems with ratings were common in recent years.
Entry level for gold too high
Gold and other commodities that are normally considered recession-proof are also recommended only under certain conditions. Although the gold price has been rising for years, the entry level is currently already very high. Many advisors believe that it is very risky to invest in gold now. There are always significant risks associated with precious metals because it is and remains speculation. But despite that, a total loss is not to be feared. Because precious metals never become completely worthless. A little gold can therefore stabilize a portfolio.
Crisis offers opportunities for bargains
For daredevils, the financial crisis offers an opportunity for bargains. Italian bonds are a good option in that context. Italy is in better shape than its reputation suggests. The situation is not nearly as disastrous as in Greece. Nevertheless, Italian bonds can be obtained at significant discounts. Large companies from these countries currently offer very good opportunities.
Invest or give up purchasing power
Most stock market analysts agree on one thing: without any calculated risk, loss of purchasing power is inevitable. The days of collecting interest without risk are over. Money no longer multiplies itself. Nowadays savers can only choose between investing or losing money .