Three ‘safe’ investments anyone can make

Boy have I got a deal for you!

How about a hassle-free investment return of two per cent? That’s right, two per cent!

Alright, I can see you’re struggling to generate any enthusiasm.

And fair enough too, when you consider most investors are chasing double digit returns in the share and property markets.

Here’s the thing: the investments I’m about to show you are super easy to do, virtually risk-free, and essentially guarantee you’ll walk away with more money. Indeed the more money you invest in these products, the more cash you’ll pocket.

These investments are for those of you nervous nellies out there, or for those patient investors who are keen to make an ‘easy’ buck or two.

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Cash – ING

Have you considered a term deposit with ING?

Now just to put it out there, ING haven’t put me up to this. I’m using it as an example because it’s a well-respected bank in the industry for its handling of term deposits.

So where do you start?

Well as usual you can find most of what you need on their website but they’ve told me the best product to get started on is their six month or one year term deposit.

Both have a rate of 2.90 per cent per annum.

It’s easier for ING customers but I’m told new clients will only lose 10 minutes of their life to get things underway.

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ING is also keen to show their “loyalty” to customers by offering depositors a bonus of 0.1 per cent if you rollover your existing ING DIRECT for a new term and hold all your funds until the maturity date.

They even throw in a grace period at rollover time in case you change your mind and withdraw your funds or make changes.

Sure, whatever ... sounds reasonable. It’s hardly a “shoot the lights out” incentive but it’s better than a kick in the pants.

For Gen Y and for the tech savvy, customers can keep track of their term deposit through online banking or through the app.

This is straight-forward, easy, ‘secure’ banking.

Most importantly, it’s competitive.

Westpac has a three month introductory fixed rate of 1.35 per cent and an introductory variable rate of 3.1 per cent.

The Commonwealth Bank’s NetBank Saver standard variable rate is 2.85 per cent.

Bonds

Don’t let these investments scare you. They’re dead easy to understand.

An interest rate security is just a term for a financial product that provides a regular (or fixed) income return.

A group of securities I want to draw your attention to are Treasury bonds (Commonwealth and State).

The Treasury bond market is an extremely deep and liquid market, where all issues are denominated

in Australian dollars and are guaranteed by the Australian Government. That’s what makes them essentially risk-free.

The “risk-free” status given to Government bonds is made all the more attractive in times of volatility in global equities markets, where it’s common to see a rally in government bonds as investors shift funds into low risk “safe-havens”.

In short, they’re relatively safe investments, provide a regular and predictable income stream, can preserve capital, and provide a way to diversify a portfolio.

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Here’s an example:

You can buy a bond with the ASX code GSBC17.

It has a coupon rate of six per cent – meaning if you bought it donkies years ago you’d now be earning a nice little return of - you guessed it – six per cent.

This bond has a maturity date of February 2017 (that’s when you can cash in).

If you buy that same security now you’ll get a return (or yield) of around 1.89 per cent.

If you’re chasing a yield of over three per cent, you’re looking for bonds set to mature after the year 2025.

So yes, the returns are boring, but if you have a whole bunch of money that you can’t afford to lose, or you’ve just inherited a large sum of money, it’s a very reasonable place to consider storing your stash... especially if you won’t need to draw it down for quite a while.

As a side note, it’s also worth mentioning that all that fiscal stimulus from the Rudd/Gillard governments, in response to the Global Financial Crisis, has meant a sharpincrease in bond issuance.

I should also mention that Bell Potter is not a bad place to start for investing in these financial products.

Again, they didn’t put me up to it. I talk to the guys down there in Melbourne regularly and I like the way they do business.

Health Care Stocks

For those of you who’d like a bit more out of life than a two to three per cent return, I still don’t think you can go past health care stocks.

The sector has performed very well over the past 5 years or so. One novel way of picking stocks within the sector is to buy companies that you can ‘relate’ to, or ones you know something about.

For example, if you snore, maybe ResMed is a potential buy for you? Or maybe you know someone that’s benefited from a Cochlear implant, or perhaps you’ve been to a Primary Health Care medical centre?

The bottom line is that Australians will always need quality healthcare and the sector is booming. It’s recording some of the highest employment rates in the country. Why not take advantage of its healthy status?!

I suspect too that Australia’s ageing population will also continue to provide the sector with a nice little tail wind.

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A small win is still a win

This column is not promising you riches, but it is promising – assuming the world doesn’t experience another Great Depression – a nice little hassle-free investment return.

Importantly, these investment products can also be the start of a more fruitful investing journey.

I think you’ll find once you get more involved in the market, you’ll learn more about business, finance and the economy more generally, and you’ll then be keen to stretch yourself further. All of the products above could form part of a broader self-managed fund later in life... or sooner!

Investing doesn’t have to be stressful.

In fact it’s well known that the less emotion that goes into your trading, the wealthier you’re likely to be.

 

David Taylor is a journalist with the ABC. Before taking up a position with the ABC, David was a financial markets analyst and economics commentator. You can follow him on Twitter: @DavidTaylorABC.