Least Risky Investments

[joe jo jo]

Hello everyone,

there is a lot of talk about this investment is better than that investment etc. In my view, all investments carry some degree of risk (even cash) and then the potential return can be hindered or helped by multiple variables.

What I wanted to ask is:
- What do you consider to be the least risky investment from the perspective of (a) stable value, and (b) returns.

Is there a specific mineral, property class or share which you think has the least potential in diminishing value.

All opinions welcome.

 

[Xenia]

The least risky investment is having the desire, drive and education to know where you are going and how to get there.

Being able to do effective due diligence and understanding markets/economies enough to have a solid business plan, market strategy and exit strategy!

The most risky thing you could do is: Nothing!!!!

Your biggest asset is your mind!

sorry but there are no easy answers and to me a passive buy and hold strategy in this market holds too much risk if it lacks value add potential.

What is risk?: Risk of losing money or risk of not making money?

 

[GreatPig]

What do you consider to be the least risky investment from the perspective of (a) stable value, and (b) returns.

For capital value, the most stable investments that I can think of are government treasuries. If you don't trust your own government, then treasuries in a country with the most stable government (from a financial point of view).

After that I guess cash in major banks, especially while deposits are government guaranteed.

This assumes no hyperinflation. If the biggest risk is hyperinflation, then assets other than cash would give the best protection. None of those assets are low-risk, but in such an environment cash in any form would be higher risk.

So there's really no one answer for all situations.

GP

 

[joe jo jo]

The least risky investment is having the desire, drive and education to know where you are going and how to get there.

Being able to do effective due diligence and understanding markets/economies enough to have a solid business plan, market strategy and exit strategy!

The most risky thing you could do is: Nothing!!!!

Your biggest asset is your mind!

sorry but there are no easy answers and to me a passive buy and hold strategy in this market holds too much risk if it lacks value add potential.

What is risk?: Risk of losing money or risk of not making money?

Thanks Xenia,

agree with you 100%. In fact I have said on numerous times if you cant accept the risk, then this ain't your game (so I dont want to sound like Im contradicting myself). But was interested in getting peoples perspectives on their choices and what drives them, after reading a few threads.

There are a lot of different investors here with different strategies. Some by commercial over residential, some buy inner city over rural, some buy raw minerals over shares and currencies over currencies. All of these things are to our disposal, so each persons perspective is important and might help some SS peoples educate themselves and diversify a bit.

 

[nonrecourse]

Property is my call

Even though I have been warning about the mother of all property crunches IMHO Property is superior because of the control factor.

Provided it is held in an appropriate structure such as a bare trust and the units are entirely owned by the super fund with a limited recourse loan. If the property falls over the superfunds loss does not entitle the creditors to anything more than the property.

In order to do this you need a 35% deposit minimum and in today's environment 50% would be prudent.

 

[joe jo jo]

Thanks NR,

I have noticed you buy into commercial a bit. That has been a good one for my family too, but I feel it holds certain risks that residential doesn't and for that matter people who don't understand the property cycle get burned in this asset class: i.e
(a) commercial tends to be dictated by other property classes and can shift in ideal location more frequently (not a general rule though)
(b) much commercial has a real life span of good years due to this typical cycle of the suburb it is in
(c) credit re-capitalisation clauses seem to be implemented more frequently in this assett.

It does however seem to give a good yeild though which people are becoming more focused on.

Would you agree ?

 

[james_w]

least risky invesment cheap acreage with a good boore good size veggie patches

few head enough to feed the family some breeders chicken fish,pigs etc

that's what I think when your talking least risky end of the day you have a roof over your head and a full stomach and of course a good still for that nightcap

 

[nonrecourse]

Thanks NR,

I have noticed you buy into commercial a bit. That has been a good one for my family too, but I feel it holds certain risks that residential doesn't and for that matter people who don't understand the property cycle get burned in this asset class: i.e
(a) commercial tends to be dictated by other property classes and can shift in ideal location more frequently (not a general rule though)
(b) much commercial has a real life span of good years due to this typical cycle of the suburb it is in
(c) credit re-capitalisation clauses seem to be implemented more frequently in this assett.

It does however seem to give a good yeild though which people are becoming more focused on.

Would you agree ?

Hi Joe jo jo
Your spot on. As for points a & b our choice of suburb has meant huge paper gains in the past ten years. Any blue chip location that can appreciate that much in the good times can also drop as much in corresponding depressed times.

The secret now is to live within our means and not sell. Its been goodbye to the book keeper,have taken that and many other jobs on, continue to drive the 12 year old volvo, paid off all the personal credit cards and watch what we spend. Simple local family holidays and count our blessings

 

[joe jo jo]

Hi Joe jo jo

The secret now is to live within our means and not sell. Its been goodbye to the book keeper,have taken that and many other jobs on, continue to drive the 12 year old volvo, paid off all the personal credit cards and watch what we spend. Simple local family holidays and count our blessings

Hi NR,

I have lived a pretty humble existence to invest over the years, so it shouldnt be too much of an issue for me. First holiday in about 8 years coming up in a month, wont need one for another 8 years, so its looking good (I think )

I still think there will be opportunity to make $$, although it will be tougher and take a bit more skill. No more of this, throw a dart at any asset and make some money.

 

[nonrecourse]

Hi NR,

I have lived a pretty humble existence to invest over the years, so it shouldnt be too much of an issue for me. First holiday in about 8 years coming up in a month, wont need one for another 8 years, so its looking good (I think )

I still think there will be opportunity to make $$, although it will be tougher and take a bit more skill. No more of this, throw a dart at any asset and make some money.

Enjoy the holiday, we had our last big one last year (3 weeks) and it will be many years before we can take our hands off the wheel to do that again. You mention having lived a humble existence in order to invest. Have you noticed how some of your "friends" tell you its ok for you or how lucky you are?

My Dad use to say the harder he worked the luckier he got He also said during the depression when he was a teenager there were lots of businesses that made money. The key was to live within your means, watch your outgoings and only commit money to expand that you could internally generate through your business.

 

[Hdb]

Enjoy the holiday, we had our last big one last year (3 weeks) and it will be many years before we can take our hands off the wheel to do that again.

NR
What problems are you foreseeing for yourself that will not allow you to take a holiday. I understand that you have your affairs in order to cope with a severe downturn. You have low debt. Interest rates are lowering. I think I read you were of the opinion that rents would not collapse. I fail to see what problems you are likely to encounter.

 

[nonrecourse]

NR
What problems are you foreseeing for yourself that will not allow you to take a holiday. I understand that you have your affairs in order to cope with a severe downturn. You have low debt. Interest rates are lowering. I think I read you were of the opinion that rents would not collapse. I fail to see what problems you are likely to encounter.

My family and I are not an island. If this financial tragedy unfolds in a worse case scenario then we are at risk too. We own and operate a service business that funds our lifestyle and helps to contribute towards paying down our commercial investment properties mortgages.

When you operate a business there is always issues with cash flow and people's discretionary spending. If we in that case were not paying attention we could lose the 60% of our assets that are not locked away in our D.I.Y. super in a blink of an eye.

What brings so many people unstuck is the erroneous belief that the perfect storm won't happen to them. The banks and the credit rating establishments did this with sub prime. They believed in a mathematical fomula called VaR, value at risk. They failed to recognise Fitzpattrick's law; that Murphy was an optimist.

 

[chilliaa]

Thanks Xenia,

agree with you 100%. In fact I have said on numerous times if you cant accept the risk, then this ain't your game (so I dont want to sound like Im contradicting myself). But was interested in getting peoples perspectives on their choices and what drives them, after reading a few threads.

There are a lot of different investors here with different strategies. Some by commercial over residential, some buy inner city over rural, some buy raw minerals over shares and currencies over currencies. All of these things are to our disposal, so each persons perspective is important and might help some SS peoples educate themselves and diversify a bit.

There is only one thing worse than no knowledge and thats a little bit of knowledge.

 

[joe jo jo]

lol - very true. But you have to start somewhere. We always start wit a little bit of knowledge, before we get a whole lot of knowledge. Also important to note, that a whole lot of knowledge can stop you from moving forward also. I.E. think of the economist who did the sums 40 years and said to himself "this perpetual growth thing doesn't add up". So he didn't do anything whilst the plummer next door invested and made the gains to set up his future.

 

[VYBerlinaV8]

I think the least risky thing you can do to invest is to pay off your PPOR loan faster. The benefits are greater equity and reduction on future liability.

 

[BayView]

For the average person with consumer debt, right now their best investment is to get it down asap.

After that, the best (safest) investment in my opinion is existing run-of-the-mill single family dwellings in nice suburbs, in nice locations, below the median if possible and with some land content for future development potential, interest only loan and lock it in Eddie for as long as you can, and be well insured.

These may not provide the most stellar return in the short term, but you will never lose your money and over time they are better than Banks and much of the shares, they are tax advantaged and always in demand by renters and buyers.

If you want a quick return; keep doubling up on the red; or black?