In financial planning reference is often made to the “risk-free rate of return”.
To think that there is anything “risk-free” about financial planning (or life in general) is laughable in the extreme.
None of us ever had, or would ever desire, a “risk-free” life. It wouldn’t be worth living.
That’s not to say we should live life (or financial plan) recklessly though.
But to accept that “risk-free” does not exist when it comes to our finances is anathema to many.
But let’s call it as it is to when it comes to the choices you have with where to put your money:
- Cash / savings / bank deposits – inflation means returns are usually negative.
- Government and company bonds – changing interest rates mean returns are uncertain.
- Property – expensive to buy, expensive to own, difficult to get rid of.
- Equities / shares – go up and down in value, sometimes to extreme.
- Commodities – don’t produce an income, have no value other than what someone else will pay for them.
None of the above are “risk-free” but what you might have noticed is that each of their risks is somewhat different. Which is also the case when it comes to their benefits.
The closest you can get to “risk-free” is a combination of all of them.