Investing money without risk and at the same time pocketing a nice return. Who does not dream of it?
Below you will find valuable information to help retail investors invest money with as little risk as possible.
Armed with these insights and tips, you can eliminate 90-100% of fraudulent, over-risky and weak investment products.
In other words, here is how to avoid overly speculative or downright fraudulent investments.
Hopefully you can learn from the insights below!
Table of Contents
- 1 Can you invest without risk?
- 2 Self-protection against risky or fraudulent investments: Analysis
- 3 What is the best way to invest money without risk? Ask questions
- 4 Investing money in real estate
- 5 Investing with little money
- 6 Investing money for beginners: Points of attention
- 7 Frequently asked question about investing money without risk
Can you invest without risk?
Can you invest without risk?
The truth: Investing money without risk and with a good return is an illusion. There are risks associated with any investment.
Even a traditional bank account guaranteed by the deposit guarantee scheme is not completely risk-free (this has already been proven in Cyprus!).
Anyone who wants to make a profit today must accept a certain degree of risk.
At the same time, it is possible to contain and limit the risk of an investment.
This can be done by doing your homework very well and by making the following motto your life motto:
Research the details thoroughly before investing!
Self-protection against risky or fraudulent investments: Analysis
How can you protect yourself from overly risky or downright fraudulent investment products?
How can you protect yourself from the nice, promising talk of slick salesmen?
Well, below are several tips to protect yourself from extremely risky investments as well as white collar criminals who lie more than they tell the truth.
By following the plan outlined below, you can assure yourself of the relative safety of a particular investment.
If you apply the following tips and steps with discipline and success, you really can save thousands of euros in the medium term.
Learn to think objectively and critically
First of all, you must learn to think critically yourself, instead of being confused by the advice that is offered to you.
For no two of your friends, relatives or acquaintances will give you the same advice.
Form your own judgement and weigh each suggestion carefully.
Every investment comes with risks (such as an opportunity cost if your money is tied up in a long-term savings product without a decent return).
Also beware of certain promises about getting rich quick and sleepy. And don’t be immediately seduced by glossy brochures with dazzling returns…
Do not be blinded by this! Investing money without risk means that you can only trust yourself when it comes to money matters.
Never decide straight away and sleep on it
Suppose you are approached with an offer to invest your savings.
No matter how appealing the prospect, research the offer and the fine print thoroughly before investing.
And do it thoroughly with proper attention and care. In other words, make sure that your research (also known as due diligence) is as complete as possible.
By thinking critically, you will be able to avoid many fraudulent and overly risky offers.
Moreover, it will also enable you to separate the wheat from the chaff and ultimately find a truly deserving investment proposal.
And yes, your time and energy are worth money, so doing a thorough due diligence yourself costs pennies.
But it can save you a lot of financial losses.
So make it a rule to thoroughly examine all investment proposals that are offered to you.
Never act before you have all the information in front of you.
Research the company behind the offer
When you are approached with an investment proposal by a representative of a company, first of all ask for background information about the company.
You need to find out which company is behind the offer before you spend time analysing the investment itself.
So ask the person in question some targeted questions to get to know the company in question better.
By asking smart and sensible questions, you will be able to avoid 9 out of 10 bad and fraudulent investments.
What is the best way to invest money without risk? Ask questions
A useful step-by-step plan is presented below.
It contains the most interesting questions to ask the representative of an investment product.
Ask the person to carefully answer the questions related to the provider.
If it is a kosher company with a good offer, the representative will be happy to answer your questions.
But… If the representative turns down your request for background information, this is a red flag!
Mafia players and cowboys will dismiss your question and say that you do not need to ask so many unnecessary questions.
It is interesting to pass on the following questionnaire to the representative.
Ask for a formal, written answer and avoid verbal statements and answers.
Investing money without risk: PART I Questionnaire
Important questions to ask (investing money without risk):
- Can you provide the full name of the company, partnership or association please?
- If it is a company, is your company name properly registered?
- When was the company founded?
- Has the company paid the latest annual taxes and licence fees to the state?
- What is the value/capitalisation of the company?
- Does the company have assets such as real estate? If you answer yes, please state the legal description of all the property the company now owns, in this state or in other states.
- Is the property described above in full ownership and free from all encumbrances and mortgages?
- If you answer no, please state in detail the nature of the encumbrance, the amount and the date on which it is due.
- Please indicate the current value of each property and whether or not it has been renovated and when.
- If you answer that certain real estate or land has been improved, please state clearly how and in what way it has been improved and clearly indicate the improvements to that real estate or land.
- What is the income from the property and what is the gross cost of the property?
- How much net profit does your company make each year?
- What other assets does the company have? And if there are other assets, where are they kept? State these assets in full, their current value and whether or not they are free of encumbrances.
Investing money without risk: PART II Questionnaire
- With which banks does the company bank? How long has the company been banking there?
- What are the company’s total debts at present? Please state to whom they are owed and how long they have been owed.
- Are there any judgements against your company or do any judgements exist against your company?
- Are there any lawsuits pending at this time? If you answer yes, please state the case number, the name and address of the claimant’s lawyer and the amount involved.
- Is there a contemplated lawsuit against the company that you are aware of? If you answer yes, please state the facts.
- Could you please give me a detailed overview of the company’s financial situation? The balance sheet, profit and loss account, explanatory notes, etc. Indicating the current income and expenditure and the net profit or loss to date (the current financial year).
- If I invest money, please indicate what my money will be used for. A breakdown of the various cost items is welcome, without hidden costs, but please an all-inclusive overview of the various components.
- Will the money I subscribe and invest be enough? Or will additional money be needed in the future for the company to successfully implement its plans? If the latter, how much more will be needed?
Analysis of the information
If the above list of questions is fully answered in writing, then this is a first step in the right direction.
You can thank the representative and tell him that you will familiarise yourself with all the information.
You can contact them later to clarify certain matters if you wish.
Open dialogue and time for reflection
Armed with the above information, you are ready to talk to the seller and ask him questions.
If he is sincere, he will try to answer your questions fully.
After you have spoken to the seller, you do not immediately give your answer and decision.
Investing money without risk means avoiding impulsive decisions.
You sleep on it again and tell him that in two or three days you will give him your final answer.
Decision and file creation
With the various documents and answers from the seller to your questions (received in writing or which you write down and have signed yourself), you decide on your own financial affairs as a judge.
Do you decide to invest your money in the opportunity offered by that firm?
Then you will be an asset to the company because you will be familiar with its operation.
You may not have been the easiest customer to deal with, but in the long run it can be a fruitful cooperation.
If your decision is favourable, file the signed report of the company, together with all data and documentation.
Should it turn out in the future that the facts stated in the company’s response report are not true, you can present the representation made to a lawyer and your case will be clear.
Investing money in real estate
Investing money in real estate is hot
But is investing in real estate still a good idea? An overheated market is not interesting for latecomers…
The advantages of real estate are stability, recurring rental income and a possible long-term capital gain.
The disadvantages of real estate as an investment are its rather illiquid nature, the high capital requirements and the possibility of local tampering with real estate taxation.
For the average retail investor with savings, investing in real estate is in any case a welcome way of diversifying an investment portfolio.
Beware of classic pitfalls and risks
Beginners are more likely to be fooled than not.
This is often because of their naive thinking and totally unrealistic view of how things work in practice.
The location is important, but also the way the property will be managed.
Active versus passive investment in real estate: It is a very important choice that will affect your private and family life.
In addition, you should choose the type of investment property that suits your risk profile.
Are you a scaredy-cat who wants as little risk as possible?
Then you should in any case opt for an investment property with a contractually agreed rental guarantee (secure rental income).
How much money do you need to invest in real estate?
There is something for everyone in the real estate sector.
Do you have only a few cents available? Then opt for a real estate fund (this can be done from as little as a few hundred euros).
Do you have more money available but don’t want to tie up everything in real estate?
Then the purchase of investment property in full ownership is still possible by combining a minimum equity contribution (of say 20% + additional costs) with a loan.
This way, you maximise the return on your own investment.
An additional advantage is that you keep some of your liquid assets free for other types of investments such as shares, funds, precious metals, and so on.
Why invest in real estate?
Since ancient times, real estate has been a solid and reliable part of any asset portfolio.
Consider it a safe haven for savings. Investing money without risk is not possible, but with real estate, the risk can really be minimised.
You will never make an incredible profit but the question is whether you need to…
Do you want a sustainable investment with periodically stable income and a possible increase in value in the long term?
Then property for rent, in the right location and at the right price, is a smart move to make your dormant capital yield more.
How can you invest in real estate?
There are numerous ways and options when it comes to investing in rental property:
- Residential property such as houses, flats, studios and duplexes
- Holiday accommodation
- Hotel rooms
- Parking spaces
- Garage boxes
- Social housing with government incentives
- Real estate packaged investment products:
- Property stocks
- Real estate bonds
- Funds specialised in (commercial) real estate
- Assisted living
- Student accommodation
- Buying property with tenants already in there [AVAILABLE SOON],
- Commercial property such as office spaces, retail spaces, etc
Investing with little money
Can you invest with little money? Without risk?
No. There is ALWAYS risk involved in an investment (as already explained above).
Even a deposit guarantee scheme for savings accounts is not watertight (just think of what happened in Cyprus with the savings in two specific banks).
However, you can reduce the risk by working with the right partner.
Specifically for smaller amounts, you can go to stock markets, equity funds and various peer-to-peer marketplaces (buying and selling crypto, lending money, buying and selling Non Fungible Tokens, and so on).
Investing money for beginners: Points of attention
What is investing?
Investing is essentially investing savings to make them grow in the long run.
The law of compound interest ensures that a certain capital can grow exponentially in the long term.
By investing savings, you can try to counteract inflation and escape the extremely low interest rates (which are even negative in some cases).
Investing in shares for beginners is certainly an option, but remember that the stock market is high risk.
Invest only what you can afford to lose (as investing without risk is not possible).
investing in startups is also a possibility, but again the same advice applies. It is a very risky form of investment.
If you want to invest without much risk, it is better to avoid the stock markets and start-ups (as well as the lucrative but very volatile crypto currencies).
Frequently asked question about investing money without risk
What is the best place to invest my money?
Investing money without risk is not possible in practice.
But you can significantly reduce the risks by cleverly investing money!
To reduce the risk of heavy losses, it is wise to spread your assets.
In the case of shares, for example, you never choose to allocate all your assets to the stock markets.
You should also allocate a portion to precious metals (e.g. gold and/or silver), real estate, bonds, and so on.
Do you like to invest in companies (via the stock exchange)? In this case, the larger the company, the lower the risk (and therefore the lower the return).
The younger/smaller the company, the higher the risk (and potential return).
Hopefully, the above self-protection tips against fraudulent and over-risky investments have helped you.