You don’t always have to take on a lot of risk in order to invest your money. In fact, some of the top investment strategies involve finding low risk investments that allow your money to grow slowly and steadily over a period of time.
Low risk investments in the UK might not be as exciting as a hot new IPO or a stock that’s getting a lot of attention in the news this second. But low risk high return investments can boost your portfolio over time and remain strong even when the market takes a turn for the worse. For many UK investors, the financial stability that comes from low volatility is an asset unto itself.
In this guide, we’ll highlight 10 of the best low risk investments in the UK today. In addition, we’ll review several top UK brokers in order to help you get started investing your money today with low risk.
- 1 Top 10 Low Risk Investments 2021
- 2 Best Low Risk Investments in the UK
- 3 1. S&P 500 Index – Best Low Risk Investment for Beginners
- 4 2. FTSE 100 Index – Best Low Risk UK Investment
- 5 3. Amazon Shares – Best Low Risk Stock Investment
- 6 4. Legal & General Shares – Best Low Risk Dividend Stock
- 7 5. Corporate Bonds – Best Low Risk High Reward Investment
- 8 6. Government Bonds – Best Guaranteed Payout
- 9 7. Gold – Best Alternative Low Risk Investment
- 10 8. High-interest Savings Account – Best Safe Play
- 11 9. Residential REITs – Best Low Risk Real Estate Investment
- 12 10. Target Date Mutual Funds – Best Low Risk Retirement Investment
- 13 Best Platforms to Invest in Low Risk Investments UK
- 14 What are Low Risk Investments?
- 15 How to Choose the Best Low Risk Investments for You
- 16 How to Buy Low Risk Investments on eToro
- 17 Conclusion
- 18 FAQs
Top 10 Low Risk Investments 2021
There are many investment options when it comes to low risk investments, but here are our top 10:
- S&P 500 Index – Best Low Risk Investment for Beginners – Invest with 0% Commission
- FTSE 100 Index – Best Low Risk UK Investment – Invest with 0% Commission
- Amazon Shares – Best Low Risk Stock Investment – Invest with 0% Commission
- Legal & General Shares – Best Low Risk Dividend Stock
- Corporate Bonds – Best Low Risk High Reward Investment
- Government Bonds – Best Guaranteed Payout
- Gold – Best Alternative Low Risk Investment
- High-interest Savings Account – Best Safe Play
- Residential REITs – Best Low Risk Real Estate Investment
- Target Date Mutual Funds – Best Low Risk Retirement Investment
Best Low Risk Investments in the UK
Low risk investments are important for both first-time investors and seasoned market experts. These investments play an important role in portfolio diversification, as they expose you to asset classes that don’t always move with the rest of the market. In addition, they ensure that you always have an investment that’s doing well and has strong future performance prospects even if the rest of your portfolio is suffering during a market downturn.
The most difficult part of low risk investing in the UK is finding the right assets to invest in. To help make the process easier, we’ll review the 10 best low risk investments you can buy today, taking a look at the past performance and future prospects of each investment.
1. S&P 500 Index – Best Low Risk Investment for Beginners
Ask any Wall Street expert what stock to invest in, and the advice they’ll give you is to put your money in the S&P 500. This is the same index fund that every major hedge fund and money manager in the world is trying to beat. Most of these experts charge exorbitant fees, yet they still can’t outperform the fund consistently.
The S&P 500 simply tracks the 500 biggest companies in the US stock market. It includes companies like Amazon, Alphabet, Apple, Facebook, Microsoft, and many other growth stocks. Since the fund tracks so many stocks, it also has low volatility compared to any individual stock. So, you’re protected against an isolated drop in, say, the banking sector thanks to performance in the tech sector.
You can invest in the S&P 500 through almost any UK ETF broker. Just look for an ETF like the SPDR S&P 500 ETF (ticker symbol SPY).
Your capital is at risk.
2. FTSE 100 Index – Best Low Risk UK Investment
The FTSE 100 index is to the UK stock market what the S&P 500 is to the US stock market. This index tracks the top 100 stocks on the London Stock Exchange, including enormous companies like BP, Rolls-Royce, Tesco, and Royal Mail. The fund reflects the diversification of the UK economy. You’re exposed to a number of different industries, which lowers your overall risk.
The FTSE 100 hasn’t seen quite the same growth as the S&P 500 in recent years, but it’s still considered a very good low risk investment for beginners. Notably, this index fund contains a number of dividend stocks, which can be automatically reinvested to grow your money even further.
There are many FTSE 100 index ETFs in the UK, such as the iShares FTSE 100 (ticker symbol ISF).
Your capital is at risk.
Investing in individual stock shares is always riskier than investing in a diversified fund. However, Amazon shares are often considered a low risk high yield investment.
Amazon has an enormous moat, and not just in eCommerce. This tech giant controls an overwhelming share of the cloud computing market, which is growing in importance every day. On top of that, Amazon has been slowly moving into groceries and building out its own delivery services. All of this means that the company’s revenue is diversified, which protects it from a downturn in one business segment.
One thing to note is that Amazon shares are currently priced over £2,300 each. We recommend using a UK stock broker that offers fractional share investing, such as eToro. That way, you can invest as much or as little as you want in Amazon stock.
Your capital is at risk.
Legal & General is one of the top dividend stocks in the UK. The company pays out over 8% each year to investors, and that stream of cash hasn’t been interrupted by the COVID-19 pandemic. On top of that, shares of Legal & General have low volatility compared to other stocks in the FTSE 100.
This financial services company offers a wide range of products including mortgages, pensions, life insurance, and investment management. The nice thing for low risk investors is that all of these products are in demand almost regardless of what the stock market is doing. As a result, Legal & General shares will often remain unchanged in value even when the broader FTSE 100 is undergoing major price swings.
You can invest in Legal & General shares through any UK stock broker. Just look for the ticker symbol LGEN. Keep an eye out for brokers like eToro that offer dividend reinvestment so that the payouts from this company are automatically put to good use in your account.
Your capital is at risk.
5. Corporate Bonds – Best Low Risk High Reward Investment
Corporate bonds are debt certificates offered by companies. When you buy a corporate bond, you’re essentially giving the company a loan. The company in turn pays out interest on the bond over time, and pays back the entire principle of your loan on a specified date in the future.
The great thing about bonds is that you know exactly what you’re getting ahead of time. A corporate bond comes with a stated interest rate, which is your annual rate of return.
Corporate bonds are also graded by credit rating agencies, so you can easily evaluate the risk that a company will default on its bond payments before you invest. Companies with a credit rating of B+ or better are generally considered low risk investments. The higher the credit rating, the lower your return, so consider investing in B+ or A-rated corporate bonds if you want a low risk high return investment.
Note that you can also invest in bond ETFs. Just like stock ETFs, these give you exposure to a wide range of bonds in a single investment. This diversification further reduces your investing risk.
Your capital is at risk.
6. Government Bonds – Best Guaranteed Payout
Government bonds, or treasury bonds, work just like corporate bonds. The difference is that treasuries are backed by governments. You can invest in a bond from the UK or US governments, for example, as well as from your local township.
Just as for corporate bonds, government bonds pay out a fixed interest rate and have a preset payout term. You should always check the credit rating of the issuing government to ensure that you’re going to be paid back on time. In general, treasury bonds are considered very low-risk if they come from a national entity like the US or UK governments.
If you want to hedge your risk even further, consider investing in an ETF of government bonds. eToro offers the iShares 20+ Year Treasury Bond ETF (ticker symbol TLT), which invests in a variety of long-term bonds from the US government.
Your capital is at risk.
7. Gold – Best Alternative Low Risk Investment
Gold is one of the best low risk alternative investments to offset any holdings you have in the stock market. Generally, when the stock market falls, the value of gold rises. Historically, the value of gold has almost always gone up over the long-term. This safe investment asset comes highly recommended by financial advisors, especially if your portfolio mostly consists of stocks and bonds.
There are several ways to invest in gold. The most direct is to buy physical gold, but this isn’t always a practical solution. Not only do you have to store the gold safely, but you typically need to pay a sales commission to sell it for cash.
A better solution is to buy gold using contracts for difference (CFDs), which give you exposure to the price of gold without actually owning physical gold. UK CFD brokers like eToro enable you to buy gold CFDs with no commission. You can also invest in an ETF like the SPDR Gold Trust ETF (GLD), which is fully backed by physical gold.
Your capital is at risk.
8. High-interest Savings Account – Best Safe Play
Putting your money in a savings account is one of the safest investments you can make. With savings accounts, you receive consistent interest payments on your investment and your deposit is guaranteed by the UK government. So, there’s absolutely no risk of losing money.
Another benefit to savings accounts is that you have the option to withdraw your money as cash at any time. Many investors use savings accounts as temporary stores to hold money in between investments, but they can also be valuable as long-term investments themselves.
The return you can expect from a savings account depends a lot on interest rates. When the national interest rate is high, your bank will pay you a higher interest rate to keep your money in a savings account. When rates are low, however, savings accounts may not outpace inflation. We recommend looking for fee-free high-yield or high-interest savings accounts, which pay out higher than average interest rates.
9. Residential REITs – Best Low Risk Real Estate Investment
Investing in real estate can be relatively low risk if you stick to residential properties and mortgages. People will always want to buy homes, after all, and the vast majority of people can be counted on to pay back their mortgages on schedule.
Once again, diversification is key. It’s a lot riskier to invest in a single mortgage than it is to invest in thousands of mortgages. That’s where REITs, or real estate investment trusts, come into play. These are essentially ETFs for real estate, which invest in thousands of properties and mortgages in the UK, US, and elsewhere.
For a simple, low risk real estate investment, we recommend the iShares Core US REIT, available through eToro under the ticker symbol USRT.
Your capital is at risk.
10. Target Date Mutual Funds – Best Low Risk Retirement Investment
If you’re looking for a low risk investment to help you meet your retirement goals, consider a target date mutual fund. These funds are similar to ETFs in that they give you exposure to a wide range of assets, including low risk stocks, bonds, and real estate. However, mutual funds are actively managed. This typically brings higher fund fees, but it also means that your fund can respond as market conditions change over time.
What’s especially nice about target date mutual funds is that they account for how your investing needs change over time. As you get closer to retirement, for example, you want to be invested with assets that have low volatility. Target date mutual funds will slowly shift from more aggressive to lower risk investments as you approach retirement, giving you the best blend of low risk and high performance.
Your capital is at risk.
Best Platforms to Invest in Low Risk Investments UK
In order to get started with low risk investing, you’ll need the right brokerage by your side. The best UK brokers offer commission-free investing and a wide range of assets to help you diversify your investment portfolio. On top of that, it’s a good idea to look for investing tools that can assist you in choosing the best low risk investments for your needs.
With that in mind, let’s take a closer look at three of our top recommended platforms for low risk investing in the UK:
1. eToro – Best for Low Risk Stock and ETF Investing
eToro is a fully commission-free broker that offers an enormous range of assets. This broker offers more than 800 US and UK stocks, including shares of Amazon and Legal & General. We especially like that you can buy shares outright and hold them for the long term, whereas many other online brokers in the UK only offer CFD trading.
This investment platform also has a selection of over 450 ETFs. You can invest in index funds or sector-specific stock ETFs, as well as dozens of ETFs for corporate and government bonds. eToro even offers several dozen different REITs, including a handful that focus on low risk residential mortgages.
Another benefit to eToro is that you can automate your investments using its copy portfolios feature. With this high quality tool, you can set all or a portion of your portfolio to copy the positions of a professional investor. This is a great way to put your money in the hands of a more experienced investor, without the fees you would typically pay for a financial advisor or money manager.
eToro is licensed by the Financial Conduct Authority (FCA), so it’s a very safe and secure investment platform.
- Over 800 stocks and 450 ETFs
- Includes bond funds and REITs
- Buy shares outright with 0% commission
- Supports copy portfolios
- Small inactivity fee after one year without trading
67% of retail investors lose money trading CFDs at this site
2. Plus500 – Best Risk Management Tools
Plus500 is geared more towards active traders than long-term investors. However, we like this CFD broker for low risk investing because it includes a handful of risk management tools to limit your downside potential. For example, when you invest in a stock or ETF, you can set a trailing stop loss. Plus500 will automatically close your position for a profit if the stock price rises for a while and then suddenly falls.
Plus500 also offers exposure to a wide range of assets. This trading platform carries CFDs for hundreds of US and UK stocks, as well as for commodities like gold. You can also invest in a variety of ETFs, although Plus500’s coverage of the bond and real estate markets isn’t as impressive as eToro’s. All investments on Plus500 are 100% commission-free.
Another nice aspect of this broker is that it provides you with the information you need to make smart trading decisions. Plus500 has a curated news feed complete with in-house analysis and market commentary. That can help you decide whether now is the right time to invest your money in the market.
- Includes risk management tools like trailing stop losses
- Wide range of stock and commodity CFDs
- Carries dozens of ETFs
- News and analysis feed
- Limited selection of bond and REIT investments
76.4% of retail investors lose money trading CFDs at this site
3. IG – Best for Retirement Investing
If you want to invest for retirement with low risk, it’s worth considering IG. This venerable UK broker offers a stocks and shares ISA (individual savings account) in addition to a general investing account. That means that you can invest up to £20,000 per year and pay no capital gains tax on your investment profits. As a long term investment, that can add up to a huge amount in savings that you can then reinvest in the low risk investments.
IG is somewhat more expensive than either eToro or Plus500. Unfortunately, IG charges a commission for share dealing that can be up to £8 per trade for UK shares and ETFs and £10 per trade for US shares and ETFs. This slightly increases your investing risk, since you need to see a bigger profit from your investments to make up for your commission payments.
Still, it’s hard to argue with IG’s selection of assets. You can access thousands of ETFs from the US and UK through this broker, including hundreds of REITs. IG also allows you to invest in individual corporate and government bonds in addition to bond ETFs. This broker also carries a range of mutual funds, including target date funds designed specifically for retirement investing.
- Offers stocks and shares ISA
- Huge selection of ETFs and mutual funds
- Invest in individual bonds
- No account fees
- Relatively high share dealing commissions
Your capital is at risk
What are Low Risk Investments?
Low risk investments keep your financial risk to a minimum. That means that the amount you could lose under normal market conditions is small compared to other types of investments.
There isn’t a strict definition of what constitutes ‘low risk,’ as this depends on your tolerance for financial losses. However, low risk investments in the UK are typically those that have a small downside compared to, say, investing in individual stocks.
When you buy shares, for example, you could lose 20% or more of your investment if the company runs into trouble or the market crashes. WIth a low risk investment, you might expect to lose 10% or less even if the market tumbles.
Keep in mind that low risk does not mean no risk. In some rare cases, low risk investments can end up losing more money than investments that look more risky. For example, it is possible that the US government defaults on its treasury bond payments, leaving you with a significant financial loss. However, this is considered low risk because the US government has never before defaulted on debt payments, and such an event seems highly unlikely.
How to Choose the Best Low Risk Investments for You
Choosing the best low risk investment for your portfolio comes down to a few different considerations.
First, it’s important to think about what type of risk-reward balance you want. For example, buying shares of Amazon is certainly riskier than putting your money in a high-interest savings account. But the potential return on your investment is much higher if you buy shares of Amazon as opposed to putting your money in the bank. It’s up to you to decide whether you’re okay with that added risk for potentially higher returns.
Another thing to consider is what’s already in your portfolio. If your portfolio is filled with stocks, you might be able to reduce your financial risk through diversification. You can invest in assets like bonds, gold, or real estate – all of which move independently from the stock market – to reduce the amount of risk you face from a stock market crash.
Finally, think about the costs associated with any investment. Individual stocks don’t have any ongoing fees, but ETFs and mutual funds typically charge management fees that apply regardless of whether the fund is gaining or losing value. Similarly, REITs often charge high fees and some may require a lock-up period in which you are not allowed to withdraw your money. These fees can be justified if the fund performs well and manages risk carefully, but you should recognize that they exist and think about whether they are worthwhile.
How to Buy Low Risk Investments on eToro
Ready to start investing in low risk assets? We’ll show you how to buy low risk investments with eToro, which offers 100% commission-free trading and a wide range of relatively safe ETFs.
To get started, head to eToro’s website and click ‘Join Now’ to register a new account. Create a username and password, then enter details like your name and email address. eToro also requires that you verify your identity, which you can do by uploading a copy of your passport or driver’s license and a copy of a recent bank statement or utility bill.
Next, it’s time to fund your new account. eToro requires a minimum deposit of £140 and accepts a variety of payment methods including:
- UK bank transfer
- Credit or debit card
- Wire transfer (extra charge applies)
Now you’re ready to make your first investment. We’ll show you how to invest in the SPDR S&P 500 ETF as an example.
From the eToro dashboard, enter ‘SPY’ in the search bar and click ‘Trade’ when it appears in the drop-down menu. In the order form that appears, enter how much money you want to invest in the S&P 500 index fund. You can set a stop loss to limit your downside risk, or a take profit level to lock in profits at a certain price.
When your trade is ready, click ‘Open Position’ to invest your money.
The best low risk investments can help you grow your wealth over time while limiting your potential losses in the event of a market downturn. Low risk doesn’t have to mean low reward, either. Many low risk investments offer returns comparable to higher risk assets, and diversified portfolios can be much more effective than single investments for long-term investors.
Ready to invest in low risk assets in the UK? Sign up for an eToro account today to get started!
eToro – Best UK Low Risk Investment Platform with 0% Commission
67% of retail investor accounts lose money when trading CFDs with this provider.
How can I invest in the stock market with low risk?
The best way to invest in the stock market while limiting your risk is to invest in an ETF. An ETF gives you exposure to a wide range of stocks, potentially covering multiple industries. ETF investing won’t protect you from a market-wide downturn, but it will reduce your risk from a downturn in a specific market sector.
Do I pay taxes on low risk investments in the UK?
Whether you pay tax on your investments depends on what you’re invested in. Most investments are subject to capital gains tax, but you can invest up to £20,000 tax-free through an ISA. Savings accounts are typically not taxed in the UK.
Are investments in savings accounts guaranteed?
When you invest in a savings account with a UK bank, your money is protected by the Financial Services Compensation Scheme. This government program reimburses you for up to £85,000 if your bank goes out of business without returning your money.
Should I invest in ETFs or mutual funds?
ETFs and mutual funds both expose you to a basket of assets. In general, ETFs are the better choice because they have no investment minimums and lower fund fees. However, you may need to invest in mutual funds if you want active management, such as for target date funds.
Are there any low risk penny shares?
Penny shares are generally considered high risk, not low risk. While there might be some penny shares that have promise, low risk investors should typically look for stocks with large market capitalizations. Stick to the FTSE 100 and S&P 500 for the lowest risk shares.
Are money market funds considered low risk investments?
Yes, money market funds are generally considered very low risk investments.