Opinions expressed by Entrepreneur contributors are their very own.
A protected investment typically refers to an option that is taken into account to have a low level of risk in comparison with other investment opportunities. While there isn’t any completely risk-free investment, a protected investment goals to preserve capital and supply a stable return over time.
Some of the common characteristics that outline a protected investment are as follows.
- Capital preservation: Safe investments prioritize protecting the initial investment amount. The risk of losing money is minimal or relatively low.
- Low volatility: Safe investments are inclined to have relatively stable and predictable returns without significant fluctuations in value. They aim to avoid large and sudden price swings.
- Liquidity: Safe investments often offer high liquidity, meaning they might be easily bought or sold without causing a big impact on their value. This allows investors to access their funds quickly if needed.
- Steady income: Safe investments regularly generate consistent money flow, reminiscent of interest payments, dividends or rental income. This income stream adds to the general stability of the investment.
- Government-backed or high credit quality: Safe investments may include government bonds or highly rated corporate bonds — that are considered to have low default risk. These investments are backed by the financial strength and stability of governments or reputable organizations.