In the world economy, where the lack of preparation of individuals has increased, a successful financial planning is indispensable. Nowadays, the globalized world has moved through innovations in the personal management process which are transmitted at the speed of light. Individuals who live a financially-organized life should be ready to face these challenges.
There are three main categories of investment classification products distributed as conservative, moderate and high-risk level. The primary objective of conservative products is to deliver an income to the investor with low-risk exposure and low fluctuation. The benefits of fixed-income products are anticipated redemption and liquidity, which mean that the invested resource has simple access.
The financial market is quite sophisticated and there are applications to meet the most varied needs of liquidity, profitability, and terms. Comprehend the types of financial products are offered in the market is indispensable to make the right decision in the financial market.
Conservative Investment Products
Investments in fixed income or conservative products are generally characterized by the purchase of products that offer predictability of income. The target market of conservative investments is tied to investors who require resources in a short period and do not have a disposition to financial market volatility (Scheuermann, 2014). Therefore, conservative products offer low investment risk.
The world's fixed-income market is gigantic in many opportunities for all types of investment for all types of investors. One of the most important products in this category of investments is known as Bonds. A bond is a debt security which provides profits to investors who lending their money to a government or private corporation. Government securities offer lower market risk at global levels. However, corporate bonds may offer greater risk since they are tied to the company's financial situation.
The essence of government bonds is to offer the profitability which is linked to government risk. The greater the risk of the government is, the higher the risk of the title. On the other hand, the lower the government risk, the lower the risk of the title (Fabozzi, 2014). In the United States, Canada and Switzerland bonds offer the highest levels of security in the global financial market.
Corporate bonds which provided by private companies should be chosen strategically by prioritizing stable and high level of reliable companies in the market. For instance, Exxon Mobil, Microsoft and Johnson & Johnson. Corporate bonds are analyzed by international rating agencies which are responsible for studying their financial situation in the market. It is meaningfully strategic examining the rating evaluation of the companies before the purchase of the title.
Other Ways to Invest in Conservative Products
To be specific, bonds are characterized by the payment of periodic interest and repayment of the invested value on the date of redemption of the title. Other investment products that are also conservative are known as Certificate of deposits – CDs and savings accounts. These investment products are also indicating for investors who seek for the protection of the invested capital and low volatility.
A certificate of deposit - CDs is a time deposit. One fundamental insight of this investment guarantees the invested value and the yield to a certain limit. The payment of interest varies and may be monthly, semi-annual or annual. The profitability of CDs varies depending on the bank and term which the application is made. Generally, the longer the application period, the greater the income offered to the investor (Camp & Haney, 2014).
Savings accounts are defined as an interest-bearing deposit account held at a bank or another financial institution. Interest rates vary from account to account, from bank to bank, and from currency to currency. Saving accounts' yields are not the most attractive on the market. However, they provide the redemption of the applied asset at any time.
Bring It All Together
The financial market is the environment in which individuals and institutions trade financial products. Also, the financial market is exposed to adjusts that may occur in the world's economy. Thus, recognizing the strategies to compose the portfolio of investments are fundamental.