Low Risk

With interest rates at record lows, there is a constant frustration among investors in the chase for greater returns.

- Dominique Bergel Grant

This low-risk strategy is about creating an alternative to cash investments. An investment that will comfortably chase down inflation, however, will not race to the finish line.

First, let’s define “low risk” and what it is trying to achieve.

A low-risk investment is one with less than 50% exposure to the share or property markets. Over a three-year time frame a low-risk investment should achieve returns of 5%-6% a year. So it is a very solid replacement for cash.

This type of investment will show minimal volatility as a large proportion, at least 50%, is invested in cash and other defensive asset classes such as government bonds. So even if there are short-term corrections in the share market or property holdings, the impact will not be as significant.

We are also seeking a high level of certainty in the income we expect to receive, and absolutely want to ensure there is no debt associated with our investments.

We also need to be patient. At this lower level of returns, $5000 will take 25 years to get to $50,000. So perhaps this is your rainy day fund.

So where to start … I am a big believer in keeping things simple. So to build this portfolio we will be looking at splitting the investment into two:

• $4000 into the Allan Gray Australia Stable Fund; and

• $1000 into BrickX property investment platform.

Allan Gray Australia Stable Fund