How to Invest without Losing Any Money

How to Invest
without Losing Any
Money
By www.ProfitableInvestingTips.com

http://profitableinvestingtips.com/bond-investing/how-to-invest-without-losing-any-money
No investment is a sure thing, guaranteed
to succeed and never lose money.

But, there are ways to improve your
chances of success and reduce your risk of
loss.

In this article we look at how to invest
without losing any money.

How to Invest without Losing
Any Money

•Bank deposits with Federal Deposit
Insurance
•US Treasury Bills, Notes, and Bonds
•Investment Grade AAA and AA Bonds
•Long term value investing, intrinsic value

Any Money: Federal Deposit
Insurance

The ultimate in investment safety is a bank
deposit insured by the FDIC (Federal
Deposit Insurance Corporation).

The Federal Deposit Insurance Corporation
(FDIC) preserves and promotes public
confidence in the U.S. financial system by
insuring deposits in banks and thrift
institutions for at least $250,000; by
identifying, monitoring and addressing risks
to the deposit insurance funds; and by
limiting the effect on the economy and the
financial system when a bank or thrift
institution fails.

An independent agency of the federal
government, the FDIC was created in 1933
in response to the thousands of bank
failures that occurred in the 1920s and early
1930s.

Since the start of FDIC insurance on January
1, 1934, no depositor has lost a single cent
of insured funds as a result of a failure.

In a period of low interest rates, such as
now, bank deposits do not look all that
attractive.

However, within the $250,000 limit, per
depositor, per bank, per account ownership
category, this is how to invest without
losing any money.

Any Money: US Treasury Bills,
Notes, and Bonds

US Treasury bills have maturities of a year
or less.

US Treasury notes have maturities from two
to ten years.

And, US Treasury bonds have maturities of
ten to 30 years.

Each of these investment vehicles is backed
by the “full faith and credit” of the US
government.

The risk of loss of any of these if held to
maturity is nil.

How to invest without losing any money in
US Treasuries is to hold them to maturity
or only sell them at a profit.

Investors lose money in treasuries if they
buy when interest rates are low and sell
when rates are high.

If you buy treasuries when rates are really
high you have the choice of holding to
maturity and enjoying the return on
investment or selling for a short term profit.

Any Money: Investment Grade
AAA and AA Bonds

Moody’s Investors Service, Standard &
Poor’s, and Fitch Ratings are credit rating
agencies.

Their ratings on bonds are a good guide to
how safe an investment is.

How to invest without losing any money in
non-government bonds is to limit your
purchases to investment grade AAA and AA
bonds.

In each case these are bonds issued by
companies with exceptionally good finances
and negligible risk of default.

The only two US companies with AAA bond
ratings today are Johnson & Johnson and
Microsoft.

Any Money: Long Term
Investing and Intrinsic Value

There is a drawback to very secure
investments like bank deposits, treasuries,
and high grade bonds.

They do not produce a very high rate of
return.

When you think about this fact, remember
what Warren Buffett said about rules one
and two of investing.

Rule number one is never to lose money
and rule two is to never forget rule number
one!

Having said that, how can you get a better
return on investment and still have a low
risk of loss?

An approach that has worked well for many
investors is first to learn how to assess the
intrinsic value of an investment.

The second part of this approach is to
invest for the long term.

Intrinsic Value
Years back we wrote about intrinsic value
analysis for stocks.

Successful long term investors consider the
intrinsic value of stock before buying and
when deciding to sell.

This approach to stock investing goes back
to the black days following the 1929 stock
market crash which ushered in the Great
Depression.

Benjamin Graham taught investors that
they did not need to play the market as
though they were picking numbers on the
roulette wheel.

Rather he taught investors to do
fundamental analysis of stocks in search of
forward looking earnings.

At the same time investors learned to
consider what features of a stock provided
a safety net in times of trouble.

This was the margin of safety that some
stocks have in the form of money in the
bank, unencumbered property, or products
that are unassailable in their market niche.

Read the article for the details, but the idea
is that you should have a clear idea of how
a company makes its money.

And you should be assured that their
business model will continue to generate
profits for the long term.

Then the issue is how long to invest to
increase the likelihood of profits and to
reduce the risk of loss.

The point of long term investing is that you
do not need to time the market.

Rather, you invest money every month,
quarter, or year in investments likely to
grow over time.

Just last year we asked a question. How
many years are required to make an
investment long term?

The long term for investing is longer than
you might think.

You need to stay in the market for longer
than 5 years and perhaps even longer than
10 years to reliably see the benefits of long
term investing.

The other part of how to invest without
losing any money was noted in that same
article.

You need to pay attention to your portfolio.
And you need to recognize when a
company’s business model no longer makes
any sense.

In our article we noted that Kodak had a
great business plan until digital
photography came along and then their
plan did not work.

How to Invest without Losing Any Money

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