Best for 0% commission stocks
Capital at risk. Fees apply. T&Cs apply
Best for active investing
Capital at risk. T&Cs apply
Best for trading tools
Capital at risk. T&Cs apply
If you’re building your investment portfolio, you may want to keep your investment risk to a minimum. But is there any such thing as low risk investing? How do you find low risk investments and are they a good idea?
In this guide, we explain some key details about low risk investments. We also answer common questions like “What is the lowest risk investment type?” and “How can you maximise returns with lower risk investments?”.
An investment is an asset you buy to give you an income, or in the hope it will increase in value in the future. Popular investments include shares, bonds, gilts, commodities and investment property.
Cash savings are usually different to investments because they are intended to meet short- or medium-term needs, rather than to provide a long-term income. Cash savings also don’t grow much over time because of low interest rates.
There is no such thing as a completely risk-free investment. However, some investments are lower risk than others. An investment is often considered lower risk if it doesn’t fluctuate much in value over time.
There are 3 main factors that make an investment low risk:
Low risk investments tend to fluctuate less in value over time and are easy to sell quickly. Lower risk doesn’t mean there is no risk at all. No-one knows the future, but can only base predictions on the past performances of different assets.
Here are some examples of historically lower risk investments:
A high risk investment is where there is a high risk of the asset losing value. It also often means that there is a higher chance that the investment will have a big increase in value.
There are 3 main factors that tend to make an investment high risk:
Some examples of higher risk investments are individual shares which tend to fluctuate more in value than a fund that invests in a range of shares. Investing in emerging markets, smaller companies and cryptocurrency is also usually generally considered high risk.
If you’re building an investment portfolio, it’s a good idea to get professional advice from an independent financial advisor. They will assess your attitude to risk and review your circumstances before suggesting investments that suit your risk profile.
Investing in low risk investments is particularly useful for some investors. You may choose lower risk investments if the following applies:
There are several different options to find low risk investments. Investments like index-linked funds or commodity funds can be bought through a pension scheme or a stocks and shares ISA (individual savings account).
Here are some of the most common ways to invest:
If you want to build a low risk investment portfolio, there are some important principles for choosing investments:
Investing is usually a balance between risk and opportunity. If you choose very low risk investments such as government gilts, you will also usually get a low rate of return on your investment.
However, it is possible to concentrate your investment portfolio on low risk investments and still enjoy a reasonable level of returns. Here are some ways to mitigate your risk but still, hopefully, get reasonable returns:
"Low risk investing can be an excellent way to dip your toes in the water and start building an investment portfolio. Low risk investments tend to fluctuate less in value than higher risk choices. This makes them a great option if you’re nearing retirement or nervous about a stock market crash.
If you’re not sure how to pick low risk investments, then it’s a good idea to get advice from an independent financial advisor. They’ll talk to you about your circumstances and be able to help you pick the most suitable investments."
Low risk investments are an important part of building a well-balanced investment portfolio. They’re particularly useful if you’re getting close to retirement or you’re worried about your portfolio losing value during a stock market crash.
You can also minimise your investment risk by picking a diversified range of investments and by regularly rebalancing your portfolio.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Want to know how to diversify your portfolio? Our guide explains healthy investment diversification, and shows you some example allocations. (Paid content)
Having clear investment goals can motivate you to get started and help you choose the right investments to achieve those goals.
Find out how to invest in startups, how long it could take to get your money and why startup investing is so risky.
We take a look at how to get the most from your short term investments.
Robo advisors are a hassle-free solution to those looking to invest in the simplest way possible. We reviewed some of the best options available in the UK.
When trading options, traders often use some kind of strategy based on how they expect the stocks to move. These can help to protect losses but can minimise gains.
With the current stock market volatility, it’s no surprise that everyone’s gone mad for share trading. But what should you invest in during a recession?
There are thousands of investment funds to choose from and finding the right one can be difficult. Check out everything you need to know about ready-made portfolios and get proper diversification all in one place.
Passive investing, a strategy where the investor tries to replicate an index (like the FTSE 100), is popular because it’s cheap and pretty simple. With interest rates low, could this work for you?
