Whatever amount of money that you want to keep intact for a specific purpose, safety of principle will be increasingly vital during the economic downturn. You may want to save your home mortgage, protect your children’s education, or establish a special emergency fund in the event of illness.

The investments you make for this purpose has a low yield. This means the percentage of profit on the principle will grow in value relatively slowly. In reality, it is next to impossible to lose the principle with government securities, CDs and strong corporate bonds in insured institutions.

But, while those securities with a fixed interest return with a constant number of dollars, the purchasing power of those investments, when liquidated, decreases in times of inflation. The results are, as prices go up, dollars buy less, and less! In many instances, this creates increased interest rates which may counteract inflation. Whether you are lending your money to others, or you actually own all or part in an investment, make sure you put safety of principle and income return at the top of your list. In fact, make it top priority.

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