When you invest in anything, you generally tend to worry about only the 3 musketeers of investment, ‘Safety’, ‘Access’ and ‘Returns.
- How Safe is my money?
- What Access do I have to it?, and
- What Returns do I get from my investment?
There is no investment vehicle or ‘asset class’ in technical terms that offers you the best of all the three. Like the 3 musketeers, they complement each other, and each investment objective dictates which one will prevail. For example, look at the picture below and you will understand what I am saying.
Some of the examples illustrated above:
- Cash in the bank is Safe, you have access, but no returns.
- Stocks are not Safe, you can sell them any time (access), and historically have provided the best returns in the long-term.
- Property (real estate) is considerably safe, you cannot sell it immediately at the price you want (access) and gives decent returns depending on its location.
Which investment (asset class) is the best?
Unfortunately, the answer is not so simple, you need to be invested in all of these asset classes in equal proportions. Simply put, diversifying into more than one asset class is the only way to protect your money. Like this article? Please share it with your friends and feel free to comment on this article below. I would love to hear your views. Next step in the ‘How to invest safely’ series is Step 3 – Saving or Investing – which is right for you?