When talking to an investment manager, you often hear about how individual savings accounts, or ISAs, are low risk investments. One of the most quoted reasons for this is the fact that an ISA is guaranteed interest, and therefore, even if you choose to do nothing with it and just allow it to remain in cash form like a standard savings account, you are still guaranteed to earn from the venture. In other words, an individual savings account is essentially money for the future that you stash today; it’s a virtually pain-free way to save so you can enjoy the fruits of your labor in your retirement years.
But this isn’t the only reason why an individual savings account is considered a low risk investment. Today, there are multiple options for “absolute return” funds which is actually the accepted industry term for what many deem as low risk investments. In a word, absolute return funds – or low risk investments – are those that are virtually guaranteed to make a profit despite the overall state of the national and global economy.
This is where investing in bonds comes into play. Corporate bonds and government bonds that have 10 year tenures, for example, often fetch returns higher than the forecasted inflation rate making it a worthy way to safeguard your ISA. The only caveat in these types of investment is to ensure that your actual earning is higher than what the traditional cash ISA would offer, otherwise there would be no incentive to not retain your account in savings form.
After government and corporate bonds, investing in precious metals may also be a viable investment alternative for your ISA depending on how it is structured. In many cases, one has to request their investment manager to authorize the conversion of the savings account into one that can be used to directly purchase precious metals like gold and silver bars and coins. In a tough and volatile global economy, precious metals like gold and silver hold tremendous value as these are assets that remain largely stable amidst the uncertainties. Investing a portion of your ISA on precious metals is certainly a good idea to hedge your other investments in more volatile assets.
All told, ISAs are one of the better long-term investments because one has all the privilege to choose lower risk ventures over riskier ones. By ensuring guaranteed interest for your ventures, you can be confident that it will fetch a significant return to help you build a stable fund for your retirement years.