The 5 keys to identifying a safe investment

The profitability of a safe investment is usually lower than that of other riskier alternatives, but its protection guarantees captivate many savers

Some people prefer to leave betting to the casino. In the investment world, a very delicate resource is at stake: people's savings. And no one wants to see their assets dwindle overnight. For this reason, many investors are looking for a safe investment. But it is not always easy to find one.

Generally, the financial environment is associated with great fortunes and business people in suits on Wall Street. However, countless people decide to invest their capital to multiply it, from students to small business owners. Ordinary individuals who work hard to get that money and who do not have a financial cushion to back them up in case of losses so they are more exposed to investment risks.

This widespread investor profile is unwilling to put their financial stability at stake. For this reason, they prefer to inject their wealth into a safe investment, i.e., a product characterized by a low level of risk.

And although it is true that in the financial field, there is no such thing as absolute security, it is possible to point out a set of keys that are very useful for finding a safe investment to deposit money.

1. Look for products with high liquidity

Liquidity is one of the pillars of any investment. But what does it consist of? This term indicates the ability of a given asset to be converted into cash quickly.

Stocks, for example, are a fairly liquid asset. Once they are put up for sale, they are usually not long to be repurchased, providing the owner with the corresponding cash. In contrast, buying and selling real estate is much more complex and time-consuming. Hence, its liquidity is lower.

As a general rule, greater liquidity translates into lower risk since, should any setback arise, the property holder should not encounter many obstacles when transforming it into cash. Therefore, a product with high liquidity will be closer to a safe investment.

However, it is essential to bear in mind that this is not an infallible rule since other types of variables that condition the risk of the operations always come into play.

2. Shy away from assets with a high level of risk

The mathematician Edward Norton Lorenz wondered in the 1960s whether the flapping of a butterfly in Brazil could trigger a tornado in Texas. This phenomenon, known as the butterfly effect, is a perfect example of how volatile and susceptible many investments are.

When talking about risk, it is usually associated with variables such as liquidity and profitability. If the former is low and the latter high, risk tends to be higher. But in reality, there are an infinite number of factors that directly and indirectly affect the value of products, especially when it comes to equity instruments.

If the company has been involved in controversies due to bad practices, the sector to which it belongs is going through a crisis, or the government is planning to pass a law that harms it, it is likely that it is not a safe investment. For this reason, savers should investigate the situation of the company they wish to finance and not just check the profitability it provides.

Often, a high-interest rate tries to compensate for an even higher risk.

3. Resort to instruments with a fixed return

As we have just mentioned, products characterized by variable returns depend on the current state of the organization and its environment. Consequently, investors with a more conservative profile tend to choose fixed-income-based mechanisms, such as Treasury bills or fixed-term deposits.

But why are they so attractive? These assets show the investor their profitability before starting the operation. In this way, the saver knows in advance the profits he will obtain, a precious guarantee of peace of mind since he does not have to wait for the evolution of the markets to know when he should withdraw his investment.

Likewise, this type of product guarantees people the return of their capital. That is to say, once the agreed term is over, they can enjoy the benefits promised at the beginning. For this reason, they rise as a safe investment for savers who wish to protect their money and avoid risks at all costs.

At the same time, knowing the fixed interest rate from the outset is critical to designing intelligent investment strategies that adapt to the needs of each investor, avoiding uncertainty and effectively managing their finances.

4. Diversify, diversify, diversify

The best safe investment is not written in the singular. The more investments a person makes, the more protected his assets will be.

If you centralize all your money in a single product and it increases in value, the benefits will be very substantial. But if it goes into losses, the consequences can be devastating. That is why one of the most repeated pieces of advice among savers is to diversify investments to reduce the level of risk.

In this way, even if one or more products fall in value, this fall is compensated if the others report gains. The blow to the investor's portfolio will be cushioned, and the total sum could still be positive.

In addition, to further reinforce the protective walls, it is advisable to combine this advice with the previous ones so that at least several of the assets chosen are highly liquid, have a fixed return, and do not belong to companies or sectors in crisis.

5. A safe investment in alternative financing?

The safe investment is not exclusive to conventional systems. Alternative financing channels can offer equally or more robust security guarantees while improving the conditions of the operation. And crowdfactoring is the perfect example.

This is one of the best-known methods whereby citizens join forces to advance companies in the amount of their invoices. It is a win-win: firms obtain liquidity at crucial moments, and investors are rewarded with interest after a short time.

These operations take place on alternative financing platforms such as Inversa, an online invoice marketplace where, in addition, the level of risk associated with each organization is detailed, intending to increase transparency and help people find a safe investment that suits their needs.

The duration of these types of operations does not usually exceed three months, making them an ideal alternative for all citizens who wish to increase their wealth quickly from home but without sacrificing security.

By combining these five recommendations, finding a safe investment that does not put the investor's savings at risk will be easier.