Risk-free investing, in the absolute sense, does not exist because all investments carry some level of risk. However, there are certain types of investments that are considered to be very low risk. These are often referred to as "risk-free" investments in financial theory, mainly because they carry minimal risk compared to other investment options.
According to numerous scholars, there is a consensus that in the realm of investments, no asset can provide a guarantee of 100% certainty, therefore making the concept of a risk-free asset non-existent.
From a technical standpoint, this statement may be accurate: Every financial asset inherently possesses a certain level of risk, which entails the possibility of a decrease in value or complete loss of value. Nevertheless, the risk associated with investing in government bonds or government debt from stable countries like Kenya is minimal, making it suitable for the average investor to see them as risk-free.
There exist several of Risk-free investments including:
1- Government Bonds:
Especially those from stable and highly rated governments (like Kenya Treasury bonds), which are considered very low risk because they are backed by the government's ability to tax and print money.
2- Certificates of Deposit (CDs):
Offered by banks, these are considered low risk because they are insured by government agencies up to a certain amount.
3- Money Market Funds:
These are low-risk mutual funds that invest in short-term, high-quality investments issued by government and corporate entities.
4- Savings Accounts: Typically insured by the government up to a certain limit and offering modest interest rates with very low risk.
While these instruments are considered low risk, they are not entirely without risk. Risks include inflation risk (the risk that inflation will erode the purchasing power of the returns), interest rate risk (the risk that changes in interest rates will affect the value of the investment), and in very rare cases, the risk of default (if the issuer cannot meet its obligations).
In summary, while there are investments that are considered very low risk, no investment is entirely without risk. This is why Ndovu Investment through the Ndovu Platform offers a variety of low and mid-risk investments including Government Bonds and Money Market Funds. Through the investment experts at Ndovu, evaluate the risks of each investment and indicate them below each investment with its risk level.
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