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invest money without risk

There’s no shortage of willing people out there that will offer you the best place to invest money without risk.

Whether you’re walking along the high-street, visiting your bank, scrolling through a social media feed such as Facebook or Twitter or even just watching TV; there’s somebody only too willing to dazzle with returns to dream of.

But is there really such a thing as a safe place to invest money without risk?

Let’s be honest, even putting your money into simple savings accounts isn’t without risk.

How so?

Two immediate risks spring to mind.

Firstly, the impact of inflation (the buying power of your money) and the secondly (a small one) is that the financial institution you entrust with your savings goes bust.

If you’re looking for the best place to invest money without risk then you need to at least invest with protection against inflation in mind.

Making sure you spread any savings between institutions is a good idea and be mindful of current Compensation Scheme  limits (currently £85,000 per person per institution for investments with the UK’s FSCS).

Additionally, if you have a spouse or civil partner splitting joint savings is a good idea.

Double the protection!

 

money-saving

What are the best invest money with no risk hideouts?

National Savings and Investments (NS&I) offer one of the best places to invest money without risk (or very minimal risk).

Up until September 2020 you could at least get a guaranteed return. Unfortunately, due to wider global economic woes rates on the best NS&I investments have been slashed making them risk free but also pretty much ‘return’ free.

Ignoring the UK government defaulting on their repayment obligations National Savings and Investment products are ‘no risk’ in the sense of default risk.

In bygone times this wouldn’t have been a consideration but after the financial crisis in 2008/2009 the weaknesses of the established financial system and credibility of ‘ratings agencies’ were called into question.

Consequently, sentiment towards governments and regulators is still fragile for many of us, but as far as ultra low risk can you get any lower than investing in premium bonds, can you?

 

 

High Interest Savings Accounts

Do high interest savings accounts provide a good inflation hedge against inflation and offer decent returns?

For most of 2020 headline high interest savings accounts have been providing returns of up to 3%.

These types of accounts are commonly used by banks as a ‘marketing’ tool to attract customers and usually offer headline grabbing interest rates – which in comparison to other miserly rates – look good!

As a temporary fix these types of accounts may provide a useful place for a year, or so.

Beware: High interest savings accounts usually have punitive conditions attached so are not without cost risk if access to funds may be needed.

 

 

Peer to Peer lending

Returns of up to 12% are regularly ‘touted’ for those willing to put their money on the line via ‘peer to peer’ lending platforms.

As trust and liquidity have dried up in equal amounts via traditional lending means (such as banks) as well as stricter lending criteria must many mainstream lenders focus on the most ‘creditworthy’.

To fill the void peer to peer lending has offered an innovative way for those that need money to borrow money from people that have it.

Beware: As an investment medium achieving higher returns is attractive but the higher the rate of return the riskier the lend and the higher chance of default.

There is the additional risk is in the form of no FSCS protection.

Peer to peer lending offers manageable risk but it doesn’t quite live up to the reputation of the best place to invest money without risk.

Dividend Paying Exchange Traded Funds (ETFs)

The popularity of using ETFs has grown and removed the high risk for individual investors (with comparative limited resources) of only being invested in a handful of shares.

ETFs that produce dividends or income on a regular basis are highly sought and enable instant diversification in comparison to individual shares.

But are ETFs the best place to invest money without risk?

Think about it like this:

An ETF, whether it’s an ishares, SPDR or Wisdom Tree ETF will be subject to falls in underlying shares the ETF is based on.

Distribution yields in the range of 4-6% provide a potential steady income (in the absence of market turbulence) but the distribution yield must be viewed in line with the ETF Total Expense Ratio (TER).

In other words the cost.

Increasingly investors are looking for value for money and expect some sort of metric (probably called VFM) in the near future.

Annuities as the best place to invest money without risk

Once upon a time with credible functioning central governments and banks, healthy interest rates enabled a buoyant annuity market.

Then interest rates plummeted and have stayed down like a ‘bum boxer.’ Another significant blow to the annuity market and especially annuity providers was the removal of the mandatory requirement (in the UK) to purchase an annuity with pension funds.

This double whammy impacted the Annuity market but for the very risk averse with a lump sum to invest an annuity may offer a solution.

Under the Mattress, anyone?

In an increasingly ‘cashless’ world it’s becoming increasingly difficult to stuff dosh under the mattress.

Those working in cash receiving environments find it increasingly difficult to ‘bank’ their gains due to anti-money laundering enforcement and potential tax issues.

Furthermore, central banks have a tendency to suddenly make certain types of cash obsolete (paper to plastic notes)

So what is the safest type of investment?

The short answer is that there isn’t one.

There are very low risk investments but with any type of investment there is always risk.

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