What is the best investment without risk?
Who doesn’t wish for that? The best investment without any risk. There are no price fluctuations, repayment is guaranteed, and the high regular returns are predictable and reliable. A peaceful night’s sleep is guaranteed. It’s the perfect solution. But frankly, who has ever seen this creature in reality? Guaranteed no one!
Risk is present even in the best investment
Risics cannot be categorically ruled out. In life, there are always risks; in fact, all of life consists of risk.
Thus, the risk-averse investor has always sought investments that were guaranteed by a bank or insurance company or even, at best, by the government. During the financial crisis of 2007/2008, all security-oriented investors became aware that even such guarantees can only be worth what the guarantor’s credit rating allows. At that time, the US bank Lehman Brothers collapsed. All certificates guaranteed by Lehmann were worthless in one fell swoop. Subsequently, Hypo Real Estate Bank, Commerzbank and even the Swiss banking giant UBS stumbled. Ultimately, all these banks were rescued by their respective governments and thus by taxpayers. So the very last resort intervened to save the savings of millions of citizens. In doing so, they believed they had invested without risk.
So we have to move away a bit from the original idea of the best investment without risk. Perhaps towards an attractive investment with manageable risk. What, then, is an attractive investment? A financial investment becomes attractive when it generates more return than the usual capital market interest rate. Since the capital market interest rate in the euro zone is currently 0%, any investment that generates a return of 2% or 3% is already attractive. But neither government bonds nor debt securities nor mortgage bonds achieve this yield. Even the bonds of large, highly rated companies do not yield 3%. So the focus should be on medium-sized or smaller companies. Or on companies that operate in niches. Such companies have to issue bonds with interest coupons of 4%, 5% or 6% to convince creditors on the capital market. These are then attractive returns.
But what about the risk associated with such companies? In principle, the investor and creditor in these cases bear the risk of default either on the interest coupon or, in the worst case, on maturity of the bond. As a rule, these corporate bonds are covered by collateral, so that in such a case collateral such as real estate holdings, machinery or the vehicle fleet is liquidated. Experience has shown that, on average, around 40-50% of the loss can still be covered in the event of a default. In normal market phases, the probability of default is around 1-2%. This is therefore a risk that is definitely present, but which can be calculated to a certain extent.
Now is the ideal window of opportunity to invest in bonds. Corporate bonds currently offer yields in excess of 7.10% p.a.
Arrange a callback from one of our experts now. We advise you free of charge & without obligation and find the best corporate bonds for you.
For investors with €100,000 or more
Free consultation & callback service
The illusion of the best investment without risk
In conclusion, we can say that there is no such thing as the best investment without risk. As an investor, you can certainly look for attractive investments with manageable risks. Genève Invest will be happy to help you find them. We would be happy to explain our investment philosophy to you in a non-binding discussion and together we will find an investment strategy tailored to your needs.