Are there any safe investments? This is a question many people think about before starting their journey in the stock market. You may have the same doubt in mind, and that’s why you’re here.
As you may know already, investing implies putting some money in line to generate future profits. Therefore, if you already know how the stock market works, you’ll know that ALL the investments carry a certain level of risk.
The reality of safe investments
Unfortunately, if you’re looking for safe investments in the stock market, you won’t find them. However, we can give you some investment tips that can help you to reduce the risk of losing your money.
Do you know anything about fractional shares? Have you heard about ETFs? Of course, these are not totally safe investments, but they can give your money a good use by taking care of it at the same time.
What are fractional shares?
Fractional shares are precisely what their name suggests: stocks divided into small shares. They have a lower price, and their benefits are the same as a whole share but distributed proportionally.
You can consider fractional shares as safe(r) investments because they let you pay a smaller amount of money instead of spending your money on the total price of a whole stock – which can reach hundreds.
Let’s look at an example.
Imagine you want to become a shareholder of an electronic company. Even though you researched everywhere, you’re not quite sure if it is the right investment for you. Then, when making your payment, you realize there’s an option to buy fractional shares of the company. So, instead of investing $540 on a whole stock, you spend only $5 on a fractional share.
Let’s say that after a couple of months, the company faces some troubles and the price of its shares drops dramatically. In this case, you would lose only your initial $5 and protect a significant portion of your savings.
No, fractional shares are not safe investments (at least not totally safe), but they work to invest in the stock market with little money.
What are ETFs?
Exchange-Traded Funds are a type of investment funds. Investment what…? Let’s explain it more simply.
When you go grocery shopping, you carry a basket filled with fruits, vegetables, drinks, candy, and other types of food. In the stock market, that basket in which you carry your products is an ETF, and the products inside it are stocks of different companies traded on the market.
Therefore, we can think of ETFs as baskets of financial securities.
The profitability of each stock forming an ETF depends on the individual performance of each company. This means that if the price of a stock rises, not all the fund will rise.
ETFs can be alternative safe investments due to their diversification. For example, if the stock of one of the companies in your “basket” goes through tough times and its price drops, you can count on the rest of the companies in your ETF to compensate for the loss.
In this way, you can avoid losing the total value of your investment.
Investing in ETFs can bring lots of benefits. Learn more about their features and how they work.
Finally…
Once you research and learn more about investments, you will notice that … THERE ARE NO SAFE INVESTMENTS, at least not in the stock market. Nevertheless, you can avoid losses by learning how to invest according to your goals and financial situation.
Fractional shares and ETFs can help you to get started in the investing world with a lower risk. Then, as you start gaining experience, you’ll learn how the market behaves, and you’ll get the confidence to make more significant investments with higher risk tolerance.
Before you go, make sure to check the rest of our articles to learn more about different investment methods and get ready to face any situation laying ahead.
