The phrase “as safe as houses” refers to something that is extremely secure, stable and low risk. It evokes the image of houses being a safe, solid investment. Here are some examples of how this phrase can be used:
Savings Accounts
Savings accounts at banks are considered as safe as houses for protecting your money. Savings accounts are federally insured by the FDIC up to $250,000 per depositor, per insured bank. This means even if the bank fails, you will not lose your savings deposit. The money in a savings account also earns a small amount of interest over time. While the interest rate is low, it does provide a risk-free way for your deposits to grow incrementally. For these reasons, savings accounts are regarded as an ultra safe place to store cash.
Bonds
Bonds, particularly government bonds, are another financial asset viewed as being as safe as houses. A bond is essentially a loan made to a corporation or government entity. The bond issuer pays back the loan at a fixed interest rate over a set period of time. At the bond’s maturity date, the lender gets the full principal back. U.S. government bonds are considered one of the safest investments around because they carry the full faith and credit of the U.S. government as collateral. Even in times of recession and financial crisis, U.S. government bonds are viewed as an invincible shelter for money. Corporate bonds carry slightly more risk but are still regarded as safe havens compared to volatile stock markets.
Owning a Home
For most people, owning a home is the epitome of stability and security. Home values tend to appreciate over the long run, making a home purchase a forcing of savings and wealth building. Paying down a fixed-rate mortgage allows homeowners to lock in housing costs for the duration of the loan. And families always have a place to live without the uncertainty of rent hikes or eviction. For these reasons, home ownership is central to the “American Dream” and seen as a bedrock to a safe, prosperous life.
Utilities
Companies that provide basic utilities like electricity, natural gas, water and sewage are as safe as houses when it comes to investments. These companies provide services that are essential to modern life. Demand remains high regardless of economic conditions. They have very consistent revenue streams and pay steady dividends to shareholders. Examples of ultra-safe utility stocks include Duke Energy, Consolidated Edison and American Water Works Company.
Insurance
Insurance companies are considered as safe as houses because they make money by accurately predicting risk. By collecting more in premiums than they pay out in claims, insurance companies create dependable profits. They invest the premiums to grow their capital pools over time. Industry leaders with diverse products lines and prudent underwriting, such as Berkshire Hathaway, often reward investors with stable returns decade after decade.
Consumer Staples
Companies that produce consumer staples are regarded as safe as houses for investors. Consumer staples are products that people cannot live without, regardless of economic conditions – items like food, beverages, household goods and personal products. Companies like Procter & Gamble, Coca-Cola and Walmart dominate their niches and benefit from loyal customer bases that buy staples in any environment. These defensive stocks pay steady dividends that grow over time as earnings inch higher.
Certificates of Deposit
Certificates of deposit, known as CDs, are savings certificates with fixed interest rates and terms. The depositor locks up their money for a set period of time, such as 6 months or 5 years, in exchange for a guaranteed return. Your principal deposit is secured by federal depository insurance. CDs are liquid in that you can cash them out after the term, although you lose some interest payments by withdrawing early. Overall, CDs offer air-tight safety for your savings at a higher return than a savings account.
Money Market Funds
Money market funds are mutual funds that invest in highly liquid, low-risk securities like short-term U.S. Treasuries and corporate debt. The funds have sophisticated managers who buy and sell quickly to maintain a fixed $1 per share price. With no volatility, rock-bottom fees and check-writing privileges, money market funds are clear substitutes for bank accounts. Leading money market funds like Fidelity Cash Reserves and Vanguard Prime Money Market Fund are relied on by millions of Americans as cash-like holdings.
Gold
Physical gold has been a trusted safe haven for thousands of years. Limited in supply and difficult to extract, gold maintains its purchasing power over long periods of time. When financial assets like stocks and bonds decline, gold often rises and acts as a stabilizing counterbalance in a diversified portfolio. Gold’s safety comes from its role as a de facto global currency – it carries no counterparty risk and will never go to zero. Many central banks and institutional investors hold large gold reserves as protection against market volatility.
Real World Example
A real world example would be someone saying “I want to invest my money in something as safe as houses right now.” This person likely wants an ultra-low risk investment that still gives a reasonable return. Based on the assets described above, good recommendations might be:
- High yield savings account
- Money market mutual fund
- Short-term certificates of deposit
- U.S. Treasury bonds
- Highly-rated corporate bonds
- Blue chip stocks that pay steady dividends
Any of those options would suit the goal of finding stability comparable to a sturdy house in a financial storm. They provide good returns with minimal volatility from an asset allocation standpoint.
Conclusion
In summary, “as safe as houses” refers to stability and security. When this phrase is used, it conjures images of solid homes that withstand the elements and provide comforting shelter no matter what. Safe as houses assets retain their fundamental value and offer reasonable returns with minimal risk. Examples span from mundane bank accounts to defensive dividend stocks. Individual investors can rest assured parking money in any of the safe as houses options described above.