Why Was Conservative Investment Approach Better?
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Why Was Conservative Investment Approach Better?

  • Highlights

  • Comparatively low on the risk factor

  • It is the mode of choice for investors with low risk appetite

  • A dependable source of income

  • Progressing capital

Conservative investment is basically a safe and secure financial portfolio which is preferred by investors who seek a steady and assured income from investment avoiding market fluctuations. Such investments are usually aimed at long term benefits instead of quick profits based on market fluctuations. They are characterised by consistency of return on investment and zero or negligible loss of capital.

Companies which are targeted for conservative investment generally have a steady growth rate, low debt ratio and dependable cash balances. Such investments are ideal for the older generation, particularly retirees, who are generally unwilling to face financial uncertainty due to market fluctuations and are aiming at a relaxed retired life with fixed benefits.

Here are a few important advantages of a conservative investment approach.

Low risk factor


The financial market is generally volatile with its own share of ups and downs. For those who are not willing to risk their money in that speculative trade are advised to invest conservatively in traditional bonds to be relived of the tension of losing their principal. Investing in conservative avenues such as fixed deposits, keeps them immune to short term market downfall, as such businesses are tried and tested enough to meet long term economic expectations. It is advisable to follow a checklist when investing in fixed deposits, which help you gain more returns.

5 Reasons to invest in Fixed Deposits

 

Dependable income

Conservative investment ensures a steady and unaltered stream of income in the form of dividends, which not only serves as the ultimate financial security for the middle class and the retired, but also benefits them with tax deductions.
However, the investor is supposed to check the financial variability of his portfolio regularly as a company’s financial operations may change, giving rise to unforeseen market dynamics, affecting stock price and leading to difference in dividend generation. Growing companies are generally more subject to these economic changes, as they often undergo frequent financial restructuring, while mature firms are stable in their operations with consistent financial flow.

Progressing capital

Companies promoting conservative investment take minimum risk to ensure a steady income. They maintain liquid capital meaning that there is a certain line of buyers and sellers to fulfill constant orders. Once there is a significant rise in the value of its stock, investors can sell and seek to buy those which are operating below the industry’s price-earning index.

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