Markets have been especially unpredictable this year, and global economic recovery from the COVID-19 outbreak continues to progress at a glacial pace. So, understandably, there is a lot of talk about what individuals can do to protect their wealth.
But even under more temperate circumstances, finding the safest place to keep money should always be a priority.
Whether trying to safeguard yourself against turbulent times or just trying to build a reliable foundation for your future, here are some top-tactics that will help you weather any storm.
1. FDIC-Insured Savings Account
Aside from just hiding your cash under your mattress, an FDIC-insured savings account is the simplest and easiest way to store your cash. FDIC stands for the Federal Deposit Insurance Corporation and is an independent organization organized by Congress. They were established in 1933 to help maintain consumer confidence in America’s banking systems, the collapse of which was a major component of the Depression.
Accounts with FDIC-Insured banks are completely covered up to a maximum of $250,000. It’s perhaps the most ironclad protection available.
The downsides are that this option provides a very low rate of return. Many banks pay less than 1% annual interest. And after the 2008 Financial Crisis, many consumers don’t trust the banks. If your bank account is lower than you’d like, read about Texas title loans.
2. FDIC-Insured Certificate of Deposit
Certificates of Deposits (CDs) are essentially loans made from consumers to banks. By the end of their term, they will have paid the full balance of the loan back, plus an agreed-upon interest. In exchange, the consumer cannot reclaim their money without paying a significant penalty.
CD’s come in a variety of term-lengths, from six months up to six years. The benefits are that, if you get a CD with an optimal rate, you’d be making more interest than you would from a savings account but with the same FDIC guarantee.
Your interest rate is also locked-in, meaning that you’ll be protected should rate go down.
The downsides are not being able to touch that money, that interest rates could improve and leave you locked at an undesirable rate, and the large deposits and long time frames required to see large returns.
Another time-tested solution for protecting your money is putting it in bonds.
You could think of them as similar to CD’s in that you’re giving a loan to an organization in exchange for the certificate. And unlike CD’s, bonds can be traded like stocks, allowing you to get your money back if needed or potentially earning you a higher return if their value surpasses your initial investment.
Bonds are considered safer than stocks, and Municipal and U.S. Treasury bonds, in particular, have lower risks than those of private organizations. But they’re not completely without risk and can lose their value, so you’ll need to weigh the potential for a higher payday is worth the risk.
4. Bond Exchange Trade Funds
Exchange-Traded Funds (ETFs) are a good option if you want more diversity in your holdings. What they are is collections of investments that have been bundled together and are individually traded on the market like stocks.
The idea is that by collecting diverse investments in a single product, you protect the greater whole from market fluctuations. They can also provide a higher return if enough of the traded investments do well.
They are not insured however and come with their own set of risks like any investment. But as they are reasonably stable, they make for a good alternative to stock trading.
5. Real-Estate Holdings
It’s been said that land os the only thing that lasts, and there’s certainly something to it. Unlike stocks and bonds, which are based on confidence in organizations that can fail, real-estate always has inherent value. And becoming a landlord is an excellent investment that can start paying a return almost immediately.
Under the right circumstances, that’s all true But there is just as much that can go wrong. If the value of real-estate bottoms out like it did in 2008, you can easily get underwater on your mortgage, and its value as a rental won’t be enough to make up the dividend. It has related expenses like maintenance that can make it riskier still.
6. Precious Metals
Similar to real-estate, the idea behind investing in precious metals is that their innate value insulates them from economic turbulence. Their scarcity and industrial applications mean that they always tend to retain value.
The value often spikes during slow markets as investor anxiety causes more people to invest in them. The primary risk is buying at the peak of a bubble. But if you can avoid that, precious metals are always one of the safer places to put money.
7. Luxury Assets
Luxury assets are anything like precious stones, fine art, or antique cars.
Similar to metals, their primary asset is that they’re physical goods and not just numbers on an account statement. But they’re far more prone to fluctuation because their value is often at the whim of collectors.
Cryptocurrency came into the world with the last decade and seemed primed to be the investment of the future. It’s not hard to see why, as a decentralized global currency would be resistant to things like inflation or large-global events.
The downside is that without any government backing, its value is driven by investor confidence. And the dearth of cryptocurrencies being introduced saturated the market and helped drive their value down.
So it’s a riskier asset than many might be interested in. However, a few currencies like Bitcoin and Ethereum are still widely traded and represent and potential safeguard against devalued currency.
9. Asset Protection Strategies
Asset protection refers to a specific means of safeguarding money. For business owners, it’s a strategy to limit their vulnerabilities to lawsuits by moving assets like property and businesses out of their name.
This involves setting up a corporate entity that assumes legal ownership of these assets. In the event of a lawsuit or other attempted asset seizure, the properties would be safeguarded by not being in the defendant’s name.
Finding the Safest Place to Keep Money Is Essential
Accumulating wealth is one thing. Holding onto it can be quite another!
That’s why it is critical to your financial health to keep a portion of your wealth protected. Learning to identify the safest place to keep money in a variety of situations will help to ensure that your hard-earned cash will remain secure.
For more on how to preserve your financial health in any situation, keep up with all the latest from Critical Financial on our website.