Safe Money Places vs. Risk Money Places
Safe Money Places
Our definition of safe money is money you cannot afford to lose, or money that is protected from losses.
Safe money places is then defined as a savings place, or institution where your principal and any earned interest are protected from losses, and are not subject to market fluctuations; the only component that fluctuates is the interest rate or yield you can earned in the future.
You cannot lose your principal and any earned interested, as long as you follow the guidelines spelled out from that institution, such as time-duration. For instance, if you decide to take all your money out early, you know there’s a penalty for early withdrawal.
Risk Money Places
The opposite of safe money is risk money. Risk money is money you can afford to lose, or money that can be lost due to circumstances beyond your control.
Risk money places are investment places or institutions, where BOTH your principal and earnings are not protected and are subject to market fluctuations.
While risk money places may offer you the potential for higher returns than safe money places, it also carries higher risks. For instance, depending on the specific market your money is invested in, you may receive a higher or lower amount than what you initially put in should you decide to withdraw your money. Your principal is never guaranteed.
The following is a comparison of Safe Money Places vs. Risk Money Places.
| Safe Money Places | Risk Money Places |
| Savings Bonds Bank Savings Accounts Bank Money Market Accounts Bank Certificates of Deposits (CDs) Fixed Annuities Fixed Indexed Annuities |
Variable Annuities Mutual Funds Stocks Bonds Real Estate Commodities |
How much should you have in safe money places vs. risk money places?
As a rule of thumb, many financial professionals have recommended that you use the Rule of 100.
The Rule of 100: Take 100 minus your age, and that’s the percentage amount of your money that should be at risk. The rest should be in safe money places.
For example. If you are 75 years old, 100 - 75 is 25. That means that only 25% of your money should be at risk; 75% should be safe.
For a no-obligation, complimentary review of your safe money vs. risk money, click here or call us at (810) 714-9021. We’re here to help you protect, grow and make your money last as long as you life’s journey.
