How Secure Your Investment?

All investments have risk, investment and even the "safe" ones are likely to be exposed to the three types of risk:

•     The potential loss of principal.
•     Loss of purchasing power due to inflation.
•     liquidity - to pay a penalty to get to your money.

You might consider the potential loss of principal as the largest of the three risk above. In fact, the loss of purchasing power due to inflation can have the same effect as a loss of principal, you will consider switching from a safe long-term investments in growth investments or generate revenue consistently.

Here are details on the three types of risk and how they can affect investment.

1. The potential loss of principal with Capital Secure Investment
Although unlikely, a lot of instances where people have lost their money in safe investments. Here is one way to help protect the security of your money.

LPS insured bank deposits. There is a limit to how much money is on the insured. Usually LPS ensures maximum Rp. 2 billion per account.

If you have funds in excess of the limit of coverage LPS, there are two ways to obtain insurance coverage:

    In cooperation with the bankers to make a name multiple accounts, such as one account in the wife's name, one in the husband's name, etc..
    Distribute funds to several financial institutions. Some banks may even do this for you by participating in a program that will allow them to put your money in certificates of deposit with other banks.

How safe are money market funds?
Money market mutual funds have short-term investments, some of these investments, the so-called commercial paper, short-term is the inter-company loans. They are considered safe because it is likely that the company will go out of business within 30-120 days before the loan ends is very small.

In 2008, the security of the funds in question, such as the financial health of a company that is under scrutiny. To alleviate concerns, financial institutions issued a temporary guarantee for people who have deposits in money market funds in 2008. The financial institution that issued the money market fund to pay insurance to participate in the guarantee program.

Check your financial institution to make sure they are participating. This warranty does not cover any new deposits made; deposits only its money market funds in 2008.

What if the insurance company that issued the annuity policies bankrupt?

Insurance companies are required by law to keep a large amount of capital that is available to pay claims. The higher the ranking of insurance companies, their financial position more secure and thus the better their ability to pay claims.

Assets in variable annuity is considered an asset of the policy holder, not the insurance company's assets and thus assets in variable annuities are not available to creditors of the insurance company in case of bankruptcy.

2. Maintaining a Safe Investment of Capital Goods But Still Can Lose Power Buy For Inflation
When you choose to make a safe investment that means your primary investment objective is long-term certainty, even if it means an investment that provides a little income. If the interest income is small, you actually lose purchasing power over time.

For example, if a safe investment yield of 4% a year and inflation is 6% per year, although the principal is safe but you actually have lost purchasing power.

3. Liquidity - Paying the penalty for getting your money back.
Many safe investments contain costs if you want to access the funds before the due date.
In the case of certificates of deposit (CDs), the cost of initial penalty may be small, such as the cost of three months of interest. In the case of fixed annuities, the cost penalty can be as large as the cost of delivery as high as ten per cent of your investment.

One advantage to a savings bank account and a money market fund is that the money is still liquid, meaning funds are available at any time, penalty-free. If you are willing to tie up money for a long time, with a certificate of deposit or annuities, for example, you will usually get a higher interest rate than today.

Related Articles :