Against the backdrop of 2023—and the ongoing debate around whether a recession is imminent—it’s no wonder that more people are thinking long and hard about their retirement. Of course, investing can be exciting for many people, but anxiety-inducing for others, on account of the inherent risk(s) involved. If you’re looking for educational information about traditional and alternative investments, you’ve come to the right place!
In this article, we’re exploring the relative safety of different investment strategies, including some of the common alternative investments you may consider for 2023 and beyond.
What Are Some Examples of Low Risk Investments?
The idea of a “low risk investment” isn’t necessarily cut-and-dry—in other words, there is no official definition or threshold that defines what “low risk” means. Rather, all investments exist along a spectrum of risk—some are simply closer to the low end of the scale than others.
Even within a particular investment strategy or category, though, there are shades of risk involved. For example, let’s say you just inherited $50,000 and are looking for the best place to invest that money right now. You’re interested in investment funds, a common enough starting point. As you do your research, you’ll encounter different investing strategies that cater to different risk tolerances, like:
- For low risk investments, you could look into fixed income mutual funds, where funds are distributed across a diverse portfolio made up of fixed income securities like bonds or money market instruments.
- If you’re game for a medium risk investment strategy, global allocation mutual funds take a diversified—though more aggressive—approach consisting of a balance between global stocks and global bonds.
- Finally, if you’re looking for the biggest potential payoff, you might consider more high risk investments like alternative investments.
As always, it’s important to consult your financial advisor for advice whenever you are considering any investment moves to assess whether such investments are suitable for you based on your investment goals, risk tolerance, and financial situation.
What Are Alternative Investments, and Are They Risky?
The term “alternative investments” generally refers to any “financial asset that does not fall into one of the conventional investment categories” like “stocks, bonds, and cash.” It’s a wide-ranging category, consisting of investment opportunities like:
- Private Equity
- Private Debt
- Hedge Funds
- Real Estate
- Life Settlements
- Commodities
- Collectibles
And yes, alternative investments come with a certain level of risk. Rarely, if ever, would someone invest all of their retirement money into alternative assets and strategies—but they may work for you if you’re looking for a more diversified portfolio (which, in turn, is a strategy that some use to help to mitigate risk).
What Are the Safest Alternative Investments?
Real estate investing is often considered among the safest alternative investments. As described by Franklin Templeton, it’s because “real estate has historically been a source of growth and income, diversification, and a hedge against inflation.”
Life settlements are another option, primarily because they are more concrete—and less hypothetical or speculation-based. When you buy a policyholder’s unwanted or unneeded life insurance policy, you largely know what you’re getting. Based on the premiums that have been paid (vs. those that remain) and the policy’s stated death benefit, it’s easy to calculate the return. The main variable that impacts the eventual value is the original policyholder’s life expectancy from the moment the transaction occurs. Life settlement investments are not without risk. You should carefully research the risks surrounding life settlements and discuss with a professional who is well versed in this field to determine if life settlements are a viable option for you.
It’s important to note that alternative investments, like all investments, carry some degree of risk. Alternative investments, similar to stocks, bonds, mutual funds, and exchange-traded funds, can lose value—even their entire value—if market conditions sour. You should carefully consider the risks of any investment prior to investing.
What Are the Best Long-Term Investments If You Don’t Want to Lose Money?
According to the experts, the best long-term investments you can make today include a mix of both traditional and alternative investments. As noted by a July 2023 Time article, “Real estate is always competing with the stock market as the best long-term investment vehicle,” adding that “competition shows no signs of changing anytime soon.”
Another way to answer this question is “it depends.” It depends on your current circumstances and future objectives, as well as, frankly, who you ask. For example, Time and Forbes have each published lists this year of what they deem to be the best long-term investments. Notice how there is some, but not a ton, of overlap between the lists.
5 Best Long-Term Investments, According to Time
- Exchange Traded Funds (ETFs)
- Dividend Stocks
- Short-Term Bonds
- Real Estate
- Alternative Assets
One Good Takeaway:
“With the uncertainty that still grips the financial markets, it’s important to settle on the right mix of investments to maximize growth in your portfolio.”
5 Best Long-Term Investments, According to Forbes
- Stocks
- Bonds
- Investment Funds
- Commodities Funds
- Real Estate
One Good Takeaway:
“Our recommendations are a great starting point, but everyone needs to decide for themselves which long-term investments make sense given their own risk tolerance and financial goals.”
Is There a 100% Safe Investment?
Because they are investments with guaranteed returns, U.S. Treasury Bonds are considered to be 100% safe. The one potential downside, for some investors, is that these bonds typically take 20 to 30 years to mature. If you’re looking for something similar with a shorter time frame to reach maturity, you could consider treasury notes or treasury bills instead.
What Is the Riskiest Investment Right Now?
Again, there is no universal answer to the question of riskiest investments, but if there’s one category that pops up on more lists than not, it’s digital assets (including cryptocurrencies and non-fungible tokens, or NFTs).
What makes these such risky investments? It turns out, plenty. According to the Financial Industry Regulatory Authority (FINRA), even though they “may present investment opportunities and might help you diversify,” they “currently lack the robust regulatory protections and market oversight that investors have with stocks and bonds.” If you’ve been following cryptocurrencies or NFT’s, even casually, you’ve likely already seen how unpredictable their performance/value can be!
What Investment Strategy Should Retirees Use in 2023 and Beyond?
From a recession-proofing standpoint, one investment strategy that many take is one that is diversified and balanced. A diversification strategy may help to insulate your investments against the risks that come with market volatility.
- Start by assessing what you have. Take stock of your accounts, including any current investment assets or guaranteed income sources.
- Decide what your objectives are. Think about your perfect retirement, and then plot out the short-, medium-, and long-term goals that can get you there.
- Understand that investing comes with risk. There are very few, if any, “sure things” in this world. Diversification is the best way to ensure that if one investment underperforms, another’s success may very well compensate for it.
- Explore a wide range of investment options. Don’t shy away from alternative investments, since some—like real estate and life settlements—can be well worth the (slight) risk.
- Speak with a trusted financial advisor. The internet has more information than you could ever want, but it also contains a lot of inaccurate information and outright misinformation. It’s always best to rely less on Google and more on trusted experts like your financial advisor or specific experts for the alternative investment you’re considering, like the team at i2 Advisors.
THIS MATERIAL IS FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY. OTHER THAN LIFE SETTLEMENTS, I2 ADVISORS DOES NOT PROVIDE THE SERVICES DESCRIBED IN THESE EDUCATIONAL MATERIALS NOR DOES IT RECOMMEND ANYONE TO INVEST IN THE ASSETS DESCRIBED THEREIN. ALL INVESTMENTS CARRY RISK AND INDIVIDUALS SHOULD CONSULT WITH THEIR FINANCIAL PROFESSIONALS BEFORE UNDERTAKING ANY TYPE OF INVESTMENT. THIS INFORMATION DOES NOT CONSTITUTE INVESTMENT ADVICE AND SHOULD NOT BE CONSTRUED AS A SOLICITATION OR OFFERING OF ANY INVESTMENTS DESCRIBED THEREIN.