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What Is a Conservative Investment?

Gold is a stable investment.
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  • Written By: Ken Black
  • Edited By: Andrew Jones
  • Last Modified Date: 27 August 2014
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A conservative investment is one where the risks are perceived to be minimal. The for this type3 of investment are generally low as well. While there may be some gains, these often hardly cover any rise in the cost of living. Conservative investments include government savings bonds, money market investments, and some types of retirement accounts. The overall goal with any conservative investment strategy is to protect the money already on hand, but also allow for a possible return on the investment.

The most common form of conservative investment is known as the money market. In this case, the market serves as a place where investors can purchase equities such as treasury bills, certificates of deposit, and other relatively safe investments. Some of these may even be covered by the an insurance policy, which will at least protect the principal.

Another conservative investment is the utilization of federal government savings bonds, which can be purchased directly. The federal government guarantees these bonds so as long as the government is in place; the strategy is sound and the investment will receive a modest guaranteed return. At the same time, these bonds also have a low interest rate, ranging anywhere from no interest up to a few percentage points.

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Though it is slightly more risky, precious metals may also be a conservative investment strategy. Gold and silver tend to remain very stable over time, thus providing a safe haven for assets. This is an especially good strategy if the investor is living in, or has the currency of, a country that may not be financially solvent over the long term. Investing in precious metals completely makes the country's relative currency value irrelevant. One inherent risk of this strategy is that the precious metals, usually in the form or coins or bars, are vulnerable to theft.

Other types of bonds, such as municipal bonds and even corporate bonds, can also be a conservative investment strategy, but are more risky than the previously-mentioned products. They also have the potential to offer a greater return on the investment. These bonds are rated based on the perceived risk. The lower the risk, the lower the return will be.

Those interested in conservative investment strategies should talk to a financial planner. These individuals should be able to recommend a number of options, and advise the investor in choosing one that is perceived as being the most advantageous for his or her situation. Though the advice these planners may give is sound, it is up to the individual investor to make the final decision.

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