[jIM_Ohio]

I will chime in that the person doing the investing needs to define a risk tolerance. There are NO risk free investments. Completely eliminating one risk (principal risk), creeps in another (like inflation risk).

Risks to consider

1) principal risk- the idea that if 100k is invested, the 100k is always there.
2) interest rate risk- the idea that changing interest rates will affect the return of the investment. 100k at 5% makes $5000. If rates drop to 3%, the investor only made $3000.
3) market risk- the risk that the market(s) the investment is in collapse. Maybe the 100k is invested in a bank CD, and the bank goes bankrupt, or the 100k is invested in Enron stock and the company goes bankrupt.
4) inflation risk- the risk that 100k today can buy something, but when investor needs money, the 100k cannot purchase that good anymore. 100k in 1600 could have purchased most of Rhode Island. Today 100k would not even get you an acre. That is inflation. Cost of goods and services increase over time.
5) return risk- risk that the invesment will not generate the return the investor needs to achieve a given goal.
6) currency risk- risk that the currency being used for the investment collapses. This is primarily seen with investing in countries outside the USA.

Investing is NOT about eliminating risks, it is about managing them. If the investor is satisfied with all the risks of an investment, then that is a good investment.

For example, I am 34 yo, and investing for retirement. I invest in 98% equities, giving myself market risk, while at same time trying to maximize return. This is best hedge against inflation. I have an emergency fund in CDs. The EF needs to protect for 3 months of mortgage payments- which are not subject to inflation. I also do not need a high return on the money (making 1-2%) as there is enough in EF to fund the objective, and I need 100% certainty that the principal is retained. I do have interest rate risk, but I am not investing the money in CDs for the return on investment- I am investing for the return of my investment.

Make sure your father knows his risks and go over them with him.

He might be willing to subject 40% of his money to the market, knowing that 60% is safe. the 60% earns 5% (60k earning 5% is $3000). The 40% position is more aggressively invested, with hope of beating inflation. It's possible that 40k earning 7% ($2800) is a good return for the risk taken. Maybe it's a 30-70 split, maybe 20-80.

Your father should define his risk level. He needs to understand risks from many market forces (principal, inflation, interest rates) before making a final decision.