Many investors want to play safe and avoid exposing their money to market-related risks. But an overly conservative investing strategy also exposes you to a type of risk which finally leaves you without having enough money in the future. There are number of people who want to keep their money “safe” and at the same time want to get good returns. Now, it’s obvious to anyone with honesty and basic common sense that this is very unlikely to happen. You can keep your money secure and get single digit returns, or be willing to take some risk and aim for much better returns. Keeping one’s money safe and getting high returns is something our parent’s generation enjoyed. In their earning days, returns were as high as 16% to 18% in relatively safe avenues like fixed deposits. Even bonds yielded over 14%. When one can get such high returns without risk, one tends to become risk averse. But in today’s world, following the advice of keeping all your money safe could have a deleterious effect on your future financial security.
If you rely on only risk-free investments, even if you have good savings, deficits will show up later because your money will not grow fast enough. When growth investments are included, the same level of savings will support your family for a longer period. Now, many will raise the doubt that, taking risks, they stand the chance of losing their savings. True, your savings may well be exposed to unnecessary risk if your approach is speculative and if you don’t give your investments enough time to do their job. Time can reduce the risk, because it’s over time that stocks and mutual funds can yield good returns, in spite of the fluctuations in between. If you are a very conservative investor, there’s the risk of providing in adequately for your future. Risk is always relative. Prudent investment and time can substantially reduce risk. And as it sounds, not taking enough risk does increase your risk, in the end.