Investing money without risk, does that exist?

Now that savings are no longer profitable, many savers are attracted by the higher returns of investing. Unfortunately, investing money without risk does not exist. The value of an investment can fluctuate greatly. Fortunately, as an investor you can limit the risk of loss.

Choose the right type of investment
Managing the risk you run as an investor starts with choosing the right type of investments. Bonds, for example, have a lower risk than equities because in principle they do not fluctuate in price. These loans are also usually neatly repaid at the end of the ride. During the term, a fixed interest rate provides income. Of course, in terms of risk, it does matter who the borrower is. Does it concern government bonds from the Dutch government, a large solid company or a smaller company? If the bonds are intended to finance a project, the terms of the loan and the underlying risk-return ratio of the project are decisive.

Risks greater with equities
Shares in a company usually have a more erratic price trend. There is a risk of investment loss if the shares have to be sold at an unfavorable time. On the other hand, the results can also be positive: there is also more potential for high profits. Here again, the investment risk depends on the individual company. Does it have a high, stable income stream? And what about in the future?

Spread the word
Of course, you can never fully know how high the risks are. That is why it is important to diversify an investment portfolio. About shares in many companies, and if desired also about many different bonds. This lowers the chance of a significant loss.
Most retail investors leave that diversification to an asset manager, mutual fund or other investment specialist who manages a diversified investment portfolio. Individuals can benefit from this spread from a small investment.
Spread is also possible in terms of entry moment. Investing a little every month reduces the chance that you will enter just during a high of the stock market and have to wait a long time for recovery. A long investment horizon also helps to achieve a good average return because bad stock market years alternate with good years.

Choose sustainable
Another way to limit risk is to choose an investment that has the wind in its sails or even offers certain guarantees. In that respect, sustainable investment in alternative energy generation such as solar or wind energy is a possibility.
Wind farms and other clean energy forms are in line with the policy of many governments and companies. Billions of dollars will have to be invested in the coming years to achieve the climate goals. Richard Jacobs of WindShareFund: 'Wind farms in Germany often still have a fixed purchase price for generated energy. We have these in our investment portfolio and that offers a good guarantee for our investors.'