I have a few thousand euros in a bank deposit and I was wondering where I should invest them, considering that I won't want to take much risk? I am ready to accept the lower ROI than investing the capital in a real business.

Gold? Shares?

I am mentioning that I am from Europe for a purpose: I don't have access to U.S. mutual funds, Federal Reserve bonds, and so on.

  • 3
    BTW: Gold is the exact opposite of least risky.
    – JohnFx
    Feb 2, 2013 at 19:30
  • Gold can be included in a diversified portfolio, but as @JohnFx pointed out... it's not low risk. Even holding money in a bank has a risk - i.e. inflation. Jan 24, 2018 at 20:02

2 Answers 2


First of all, congratulations on saving some money. So many people these days do not even get that far.

As far as investments, what is best for you depends heavily on your:

  1. Risk Tolerance (how much risk you are willing to accept, which you mentioned was Low in your question
  2. Time Horizon (how long you're willing to tie up your money in the investment), and
  3. Liquidity needs (whether you can access your money quickly if you need to)

Here is a quick summary of types of assets that are likely available to you, and my thoughts on why they may or may not be a good fit for your situation.

Cash Equivalents

Cash Equivalents are highly liquid, meaning you can get cash for them on fairly short notice. In particular, Money Markets and Certificates of Deposit (CDs) are also considered very safe when issued by a bank, as they are often insured against loss by the government up to a certain amount (this varies quite a lot by country within Europe, see the Wikipedia article here for additional detail. Please note that in the case of a CD, you are usually unable to get access to your money for the length of the investment period, which is usually a short period of time such as 3 months, 6 months, or 1 year.

This is a good choice if you may need your money back on short notice, and your main goal is to preserve your principal. However, the returns tend to be very low and often do not keep pace with inflation, meaning that over several years, you may lose "real" purchasing power, even if you don't lose nominal value in your account.

Special Note on Cash Equivalents If the money you want to invest is also your Emergency Fund, or you do not have an Emergency Fund, I would highly recommend Cash Equivalents. They will provide the highest level of Liquidity along with a short Time Horizon so that you can get your money as needed in the case of unforeseen expenses such as if your car breaks down.


Debt investments include government and corporate bonds. They are still considered relatively safe, as the issuer would need to default (usually this means they are in bankruptcy) in order for you not to be paid back. For example, German bonds have been considered safer than Greek bonds recently based on the underlying strength of the government. Unlike Cash Equivalents, these are not guaranteed against loss, which means that if the issuer defaults, you could lose up to 100% of your investment.

Bonds have several new features you will need to consider. One is interest rate risk. One reason bonds perform better than cash equivalents is that you are taking on the risk that if interest rates rise, the fixed payments the bond promises will be worth less, and the face value of your bond will fall. While most bonds are still very Liquid, this means that if you need to sell the bond before it matures, you could lose money.

As mentioned earlier, some bonds are riskier than others. Given that you are looking for a low-risk investment, you would want to select a bond that is considered "invesment grade" rather than a riskier "junk" bond.

Debt investments are a good choice if you can afford to do without this money for a few years, and you want to balance safety with somewhat better returns than Cash Equivalents. Again though, I would not recommend investing in Debt until you have also built up a separate Emergency Fund. If you do choose to invest in bonds, I recommend that you diversify your risks by investing in a bond fund, rather than in just one company's or government's debt. This will reduce the likelihood that you will experience a catastrophic loss.


Ownership assets includes stocks and other assets such as real estate and precious metals such as gold. While these investments can have high returns, in your situation I would strongly recommend that you not invest in these types of investments, for the following reasons:

  1. Ownership assets are risky. In addition to default risk and interest rate risk, you are now also being rewarded for taking on Market Risk. This means that your investment is worth whatever someone else thinks it is worth. If today people think Facebook is going to take over the world, and tomorrow they change their minds, guess what happens to the price of Facebook stock?
  2. Owners get paid last. If the company fails, they will pay their expenses and debt first. If there is nothing left over for the owners, too bad! This also means that the company's equity shareholders are more vulnerable to events beyond the company's control that reduce the value of the company, such as if there is a global recession.
  3. Ownership investments are more volatile than other investments. That is, their value changes often and can potentially change by a large amount in a short period of time.

For these reasons, debt is considered a safer investment than equity for any particular company, government, or the market as a whole. Ownership assets are a good choice for people who have a high Risk Tolerance, long Time Horizon, low Liquidity needs, and will not be bothered by larger potential changes in the value of the investment at any given time.

Special Note on Gold

I would consider Gold a very risky investment and not a good fit for you at the moment based on what you've shared in your question.

Gold is considered "safe" in the sense that people believe that if the economy goes into recession, depression, or collapses entirely, gold will continue to be valuable. In a post-apocalyptic world where paper money became worthless, it is still a good bet that gold will always be considered valuable within human society as a store of value.

That being said, the price of gold fluctuates almost entirely based on how bad people think things are going to get. Think about the difference between gold and a company like Coca-Cola. Would you like to own 100% of Coca-Cola? Of course, because you know there is a very good chance that people will continue to spend money all over the world on their products. On the other hand, gold itself produces no products, no sales, no profits, and no cash flow. As such, if you buy gold, you are really making a speculative bet that gold will be in higher demand tomorrow than it is today. You are buying an asset (the gold) rather than part of a company's equity or debt that is designed to throw off payments to its investors in the form of bond payments or dividends. So, if people decide next year that things are improving, it is possible that gold could lose value, given that gold prices are at historically high levels.

Gold could be a good choice for someone who has a large, well-diversified investment portfolio, and who is looking for a hedge to protect against inflation and other risks that they have taken on via their other investments.

I hope that is helpful - best of luck in your choices. Let us know what you decide!


Putting the money in a bank savings account is a reasonably safe investment. Anything other than that will come with additional risk of various kinds. (That's right; not even a bank account is completely free of risk. Neither is withdrawing cash and storing it somewhere yourself.)

And I don't know which country you are from, but you will certainly have access to your country's government bonds and the likes. You may also have access to mutual funds which invest in other countries' government bonds (bond or money-market funds).

The question you need to ask yourself really is twofold. One, for how long do you intend to keep the money invested? (Shorter term investing should involve lower risk.) Two, what amount of risk (specifically, price volatility) are you willing to accept? The answers to those questions will determine which asset class(es) are appropriate in your particular case. Beyond that, you need to make a personal call: which asset class(es) do you believe are likely to do better or less bad than others?

Low risk usually comes at the price of a lower return. Higher return usually involves taking more risk (specifically price volatility in the investment vehicle) but more risk does not necessarily guarantee a higher return - you may also lose a large fraction of or even the entire capital amount. In extreme cases (leveraged investments) you might even lose more than the capital amount.

Gold may be a component of a well-diversified portfolio but I certainly would not recommend putting all of one's money in it. (The same goes for any asset class; a portfolio composed exclusively of stocks is no more well-diversified than a portfolio composed exclusively of precious metals, or government bonds.) For some specifics about investing in precious metals, you may want to see Pros & cons of investing in gold vs. platinum?.

  • Yeah, gold prices change fairly extensively, and certainly isn't what I'd consider a low-risk investment. onlygold.com/tutorialpages/prices200yrsfs.htm is interesting. Feb 1, 2013 at 16:16
  • 1
    It is almost scary coming back to this a few months later, reading the first paragraph that was written about a month and a half before the Cyprus rescue package terms debacle.
    – user
    May 29, 2013 at 9:28

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