Investing in Low-Risk and Risk-Free Investments
We all want high returns on our investments but usually, the reality is that additional risk is usually directly tied to additional returns. So, the question is this...can you still grow your wealth with only low risk or risk-free investing?
The short answer? Yes, using the right strategies, knowledge, and tools can make low risk investing both sustainable and profitable brought to you by Moneyplantfx.
In this article, we are going to discuss risk-free investments, what they can be defined as, why you should invest in lower risk instead, and how to do so—presented by Harsh Agrawal, a seasoned trader in finance.
What is a risk-free investment?
A risk-free investment is one that guarantees a return and keeps the principal secure. For example, buying government securities of a financially strong country means that you have confidence that the issuer will fulfill the payments.
But the truth be told; there are very few truly risk-free investments. Even so-called "safe" government bonds carry the risk of inflation, changed interest rates, or unexpected economic changes.
The markets are constantly moving based upon world events, policy changes, and unexpected crises (COVID-19). As a result, even the most "safer" assets will never be 100% risk free.
That is why at Moneyplantfx, we focus on reducing risks intelligently rather than chasing risk-free returns that will never exist.
Understanding the Risks Involved With Investing
The reality is: Risk is a part of investing. Just because investing involves risk doesn't mean you need to avoid it altogether, rather you must learn to manage and control it.
"Risk isn't the enemy - it's unmanaged risk that's dangerous." - Harsh Agrawal
When you understand how risk works, you can make informed decisions, plan ahead, and grow wealth slowly, methodically, and securely.
So, stop looking for "best risk-free investments." Instead, start looking for assets with a good risk to reward ratio. This mindset is what separates the beginner investor from the seasoned investor; looking for the assets or strategies that mitigate risk as much as possible, instead of avoiding it at all costs.
How to Make Low-Risk Investments Work For You
Here's how you can implement low-risk strategies effectively and be able to grow your portfolio over time:
1. Develop a Trading Plan
Before you invest one dollar, you should have a plan. You should define:
Where you will enter and exit
Stop-loss and take-profit points
Your risk-reward ratio
Time advantage
Always remain cool and disciplined—especially in volatile markets.
2. Implement Risk Management Techniques
The 1% Rule - Never risk more than 1% of your total capital in any individual trade. For example, if your account is $10,000, the maximum amount in which you could risk on any trade would be $100. This is essential for ensuring longevity and sustainability even when in a losing period.
Stop-Loss and Take-Profit Orders - Stop-loss and take-profit orders automatically close your trades, allowing you to lock in your profits or to minimize your losses. Use technical analysis to confirm your levels.
This way, if the trade goes against you, your loss is capped - and you protect your portfolio.
3. Diversification Is Important
"Never put all your eggs in one basket." - timeless investing advice
Diversify across:
Sectors (tech, energy, healthcare)
Asset types (stocks, bonds, ETFs, forex)
Geographic regions
This will allow you to lessen the impact of any one underperforming market in your asset mix. You can achieve balance with stocks on one side, and bonds or ETFs on the other side, and the global approach that can also help balance as well.
4. Utilize Hedging to mitigate risks
Hedging is the process of establishing a second position that will protect your first trade. For example:
You may buy gold, if your stock portfolio is exposed to a downturn in the market;
You can use options or futures to hedge against losses.
If you choose to hedge, you might lose a little bit on the upside, but you will sometimes be happy that you did so you don’t have a huge loss, especially if the market is volatile.
Play it Smart, Not Safe - Get Started in Low Risk Investing today
Low risk investing isn't about being safe - it's a safe way to play smart by applying risk managed investing strategies to avoid unnecessary risk.
You can invest in the financial world without fear when you adopt the right thinking and approach the markets with the right tools, education, and expert advice.
Start investing with MoneyPlantFX and let Harsh Agrawal help you unlock your financial potential.
