Zero-Risk Market Returns for the Ultra-Conservative Client

Document Type



Published by the Financial Planning Association in the Journal of Financial Planning, volume 22 issue 1, 2009. Bryant users may access this article here.


investments; investment policy; treasury bills; government security; rate of return; capital investments; securities


Financial Planning Association

Publication Source

Journal of Financial Planning


Within any financial planner's client base there may be individuals who will not accept loss of principal under any investment plan. This paper presents three investment illustrations whereby the preservation of principal can be met and have an absolute gain with annual investment returns of 10 percent, 0 percent, and -10 percent for time horizons between 5 and 45 years. • The concept is to buy zero-risk discounted U.S. Treasury bills and invest the discount so that only the discount is at risk. When the discounted T-bill matures to face value, the total investment amount will be the face value of the T-bill plus any investment gain on the discount that had been invested in the market at the time of purchase of the T-bill. • Using a discount rate of 3 percent and the historical market return of 10 percent, the results of investing between $1,000 and $5,000 annually for time horizons between 5 and 45 years show total accumulations of over $5,500 and $1,455,000, with gains over $500 and $1,230,000, respectively. • Further, the paper shows that even at a market return of negative 10 percent a year, total accumulations for the different investment amounts and periods will be between $54,000 and $273,000, with gains between $9,000 and $48,000. • The paper also shows what rates of return on alternative zero-risk investments, such as federally insured certificates of deposit, are necessary to equate with this method.