5 Safe Investments to Building Wealth in HK

1. High Yield Savings account

If you do not want to take any risks, you can consider a safe investment with relatively high returns such as setting up a high-yield savings account like Citi Plus Account to enjoy high interest rates. For example, holders of Citi Plus Account can enjoy up to 1.8% p.a. on the first HK$300,000 balance.

However, the downside is that interest rates are generally low across the board for saving accounts, and may not always keep up with inflation, meaning that your money could lose purchasing power. Also, your money is locked up for some set period of time. If you need to withdraw your money earlier, you may end up paying a penalty fee, and your interest rate will be reduced. To mitigate this risk, you should ideally have an emergency savings fund worth 3 to 6 months of your living costs to cover unexpected costs, without needing to withdraw from your investment.

2. Bonds/ Certificates of Deposits

While it's safe to save some cash for emergencies in your savings account, investing in safe investments such as bonds or certificates of deposits (CDs) issued by governments or well-known corporations when they want to raise funds for their operations or a special project is also a really safe investment. There is a really low default risk for investment-grade bonds, but investing junk bonds poses a greater risk, which we would not recommend for safe investments. Having investment-grade bonds in your portfolio can offer you a relatively high and predictable income, as it is generated by interest throughout their life such as six months, one year, or five years.

Moreover, you could potentially enjoy capital gains when buying and selling bonds/CDs. Also, your principal is protected at maturity provided that the issuer does not go default. Therefore, it’s important to select high credit quality financial institutions to keep your investment safe. You can also buy bonds through a mutual fund.

3. Saving Insurance Plan

To grow your money steadily, you can consider taking out a savings insurance plan. For example, you may purchase a 20-year or 30-year term life policy. These policies function like the other types of insurance policies and you can pay a premium monthly or yearly. For one thing, you can accumulate your wealth with the guaranteed cash value and for another, you can also boost your potential return through a non-guaranteed terminal bonus.

Similar to fixed term deposits, you will lose most of the cash value if you surrender earlier, which is not recommended. If you are not ready to commit for 20 or more years, this safe investment may not be suitable for you.

4. Gold

Gold can be a safe haven as it is protected against inflation over the long term. According to Forbes, even during the most recent bear market, the gold index dropped by a mere 2% even though equities dropped by 33%. It shows that it is a safe investment. However, similar to stocks, it can experience drastic price swings in the short run. You can also invest in Gold ETFs (as opposed to holding physical gold) to avoid the costs and inconvenience of markups, storage costs, and security risks.

5. Real Estate

If you have a large upfront investment, you can consider investing in real estates. Real estate investments can add diversification to your portfolio and be an additional income stream. It may be appreciated in the long run and you can earn rental income each month.

However, it also comes with additional costs other safe investments do not require, such as maintenance fees and management fees, etc. If you do not have enough funds to buy physical real estate, you can also consider buying REITs (real estate investment trusts). REITs usually pay investors high dividends, which makes them a common investment in retirement.