Secure Investments

The potential return you earn on your investment money is directly correlated to the riskiness of that particular security. There are actually very few investments that are considered riskless, or secure. Examples of some secure investments include money markets, treasury bills, government agency bonds, and other short-term cash instruments.

Creating an Efficient Portfolio

While secure investments have a place in every portfolio, you have to assume some more risk in order to reap stock market rewards. You will only achieve your financial goals by creating an efficient portfolio, which means investing in several different asset classes. Financial advisors and financial software programs can help you determine the best possible mix of investments based on your specific characteristics. Your unique blend will depend heavily on your individual risk tolerance and number of years until retirement.

Once you have your portfolio outline, you can start selecting particular securities to invest in. Regardless of age, every portfolio should have a percentage of its assets (even if it's a small percentage) in secure investments, like money markets or T-bills. If you're willing to tolerate some more risk, stocks and mutual funds make excellent investments. Remember, you're investing for the long-term so don't panic when there's market volatility.

You can examine how risky a particular security is compared to its relative benchmark by something called the Beta coefficient. If the Beta number is greater than one, that investment is more risky than the comparable benchmark. For example, if a mutual fund has a Beta of 1.2, it is 20 percent times more risky than the index it attempts to mimic. Whether you're looking for secure or risky investments, you'll want to examine the risk of any security before you go ahead and invest. This will help you estimate where you may stand in the case of a down market.