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Market volatility can test one's confidence in riskier assets like stocks and shares. Recent fluctuations, such as those affecting the ASX due to recession concerns and rising interest rates, often lead investors to seek safer alternatives until stability returns.
Stable, lower-yield investments can provide protection for capital and modest growth during turbulent times. Here are some options that generally offer lower risk compared to stocks, while potentially offering peace of mind:
1. High-Interest Savings Accounts: With interest rates rising, high-interest savings accounts have become more attractive. For example, ING’s Saving Maximiser offers up to a 5.5% return (as of July 30, 2024) under certain conditions, such as regular deposits and transactions. These accounts are protected by the Australian Government’s Financial Claims Scheme, safeguarding deposits up to $250,000 per Authorised Deposit-taking Institution (ADI).
2. Term Deposits: These offer a fixed return with minimal risk. Investors lock in their funds for a set period, typically with penalties for early withdrawal. ASIC’s Moneysmart advises checking factors like interest rates, investment periods, minimum amounts, and fees. As of August 19, 2024, smaller banks like Judo or G&C Mutual offer term deposits with rates around 5%.
3. Gold: Known as a ‘safe haven’ asset, gold can provide stability and diversification, especially during economic instability. It serves as a hedge against inflation and can be bought directly (e.g., bullion, coins) or through ETFs and shares in gold mining companies. While generally considered a stable investment, the price of gold is subject to market fluctuations.
4. Bonds: Typically more stable than stocks, bonds involve lending money to governments or corporations in exchange for regular interest payments and the return of principal at maturity. Types include:
- Corporate Bonds: Issued by companies, usually requiring higher minimum investments, and carrying credit risk.
- Australian Government Bonds: Also known as Treasury Bonds, offering guaranteed returns if held to maturity.
5. Property: Investing in real estate can provide rental income and potential for capital growth over the long term. Options include direct property ownership or property investment funds. While generally stable, property investments can be affected by economic conditions and are relatively illiquid, meaning they can be difficult to sell quickly.
Remember, no investment is entirely without risk. Even seemingly safe options can be affected by inflation or other factors, so it’s essential to evaluate each investment based on personal financial goals and risk tolerance.
