Expert: Paul Henneman - 5/2/2009

Question
Hi,

I would like to know, what is the best and safest way to make your money grow in long term (10 to 20 yrs) Other than saving it in your bank account or opening a savings account.

Answer
Kam,
  Thank you for your question!
Typically the safest types of investments are things like CD's (certificate of deposits) or money market accounts. These types of accounts only earn a few percentage points of interest, but are generally perfectly safe as long as the institution you purchase them from is stable. The problem is that inflation is often the same, or even higher than the interest you can earn on these safe investments. This means that you will actually be losing wealth, as your savings will grow more slowly than the cost of goods. But, if safety is what you are looking for those two things are the safest.
  Other things to consider: Investment grade life insurance such as a whole life policy. This often offers a higher percentage return than the current rates on CD's. Life insurance is no longer just about paying a sum of money to your family in the event of your death. Now, these policies can act like investment accounts, that earn interest and grow. If you go with a stable insurance provider, it can be very safe. The policy builds a cash value that you can then access tax free down the road.
   One final suggestion to look into is bonds. This is a bit riskier than the above suggestions, but not much if you stick to general bond funds and do not purchase individual bonds. An index bond fund can earn perhaps 6% or more per year in return, very stable, which is typically more than inflation.
   Unfortunately the one rule about investing is that to get strong returns, and see significant growth in your investments, requires risk. The more risk you take, the higher the potential returns, but also increases dramatically the chances of a bad outcome.  Low risk investments grow much more slowly, but do not have the potential downside.

I hope that this helps at least a bit. Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com