What is the Safest Place to Invest Money?

A lot of people often ask me: What is the safest place to invest money? This question is problematic because there is no definitive answer. Everyone wants a safe place to invest money, but in reality no such place exists. I'll explain.

To begin, what are the most common ways you can invest? Before I get to the safest places to invest money, let's take a look at the possibilities. Usually people suggest the stock market, real estate, CDs, savings accounts, and the mattress as the safest places to invest money. But are these options really safe?

I'll start with the stock market. The stock market is a roller coaster of possibilities. Why the stock market is not be the safest place to invest money is that the market is nothing more than a place to buy pieces of paper which can represent anything from physical food products to foreign currency to company shares. Whatever those pieces of paper represent can be impacted by incidents that will lower or dissolve their value. If a company goes bankrupt, all it's shares drop in value to nothing. If you bought 'shares' of potatoes right before a hidden stash of billions of potatoes were discovered, the inventory would sky rocket and the demand plummet, which in turn would devalue your 'shares' drastically. And so on. Many of the risks are usually rather small and can vary depending on the market type and investment. The point is that the market is probably not the safest place to invest money since it will ALWAYS suffer the risk of dropping the value of your investment because of some potentially unforeseen situation.

So how about real estate? Real estate happens to be my own personal favorite. The positive potential of real estate compared to it's risk is phenomenal. But the problem is whether or not real estate the safest place to invest money. No, of course it's not. Why? Real estate is unpredictable and full of similar uncontrollable risks. It is possible to buy a house and then discover afterward that it was built on a toxic dump site and watch are left to watch as the property value drops to almost nothing right before your very eyes. The property could also suffer irreparable fire damage or collapse after an earthquake. What if a drug dealer moves in and turns your rental property into a meth house? Any one of these scenarios could zero out your investment faster than you can blink. Any of these uncontrollables make real estate easily not the safest place to invest money.

Then what about CDs? Certificates of Deposit are usually thought of as one of the safest places to invest money. People usually think CDs are safe because they are really just like giving a loan to a bank. And since we usually think of banks as being very stable, lending them money would be as well. However, the truth is that banks are just like businesses. Just like businesses, banks can go bankrupt and swallow with them all the money they had in their possession. What this means is that if a bank were to collapse while you have your money buried in a CD, you could lose it all, even the 3% ROI. One good thing about CDs, though, is that they can be insured. Insurance makes CDs about the safest place to invest money. But there is still more to read.

Let's look at savings accounts next. Savings accounts are a lot like CDs because they are basically just like lending to a bank with a promise that you will not lower your account below a certain level. But, again, ff the bank dissolves, so does your cash. The main reason a savings account can be considered safer is because the money is more liquid.

Finally, we come to keeping your money under the mattress. The problem with this is that you're susceptible to theft, fire, or more. But the real problem here is actually inflation. Inflation slowly eats away your savings. If inflation averages 3% annually, the buying power of your money will reduce by 3% every year. This means that in 33 years your cash will be worth nothing.

So what does all of this mean? There is no safest place to invest money. Everything you can invest in carries with it a unique risk. How risky an investment is is something only you can measure for yourself. would watching your cash erode at 3% a year every year riskier than letting a financial institution borrow from you? Is natural disaster too frightening to risk investing in real estate and watching your money double every 5 years? These are questions that only you can answer for yourself.

So what is the safest place to invest money? That question is something you will have to answer. And so, I ask YOU, what IS the safest place to invest money, for YOU?

Author is a writer for Beginner Investing for passive income and Stock Market For Beginners, a blog joint blog about personal investing and development of passive income.