Yep, we know. All investing involves risk. But there is a surprising amount you can do to invest your money, at a sensible level of risk. As an online investment advice service, Moneycube works with you to find the appropriate low-risk investment fund for your needs.
Here are five ‘Do’s’ and one ‘Don’t’ for a low-risk portfolio.
Do: Control your cash
It’s always worth keeping some of your savings in cash. If you need it in a hurry, you’ll avoid being a ‘forced seller’ of your investments. And what’s more, you’ll find it easier to manage our second ‘Do’…
Do: Give it time.
Investments need time to grow. The more time you give them, the less risk you run. In fact, over any rolling 23-year period in history, shares have never lost money!
Do: Invest through a low-risk investment fund
Now, we’re biased, because investment funds are our speciality.
But it’s a fact that investing through a fund (rather than, say, choosing individual stocks yourself) reduces your risk. That’s because funds place your money in lots of different places, spreading your risk.
On top of that, a professionally managed investment fund will be monitored and rebalanced regularly to maintain its risk profile within pre-set parameters.
Do: Look at volatility
Investment funds are available with many degrees of risk and return. It’s wise to accept a level of risk commensurate with the return you are seeking.
One measure of this is maximum drawdown. This is a way of measuring the worst loss you would bear if you invested at a fund’s peak, and sold at the bottom of the market before prices picked up again.
Ask your advisor what levels of volatility you can reasonable expect.
Do: Consider an absolute returns fund
Absolute returns funds focus on reducing volatility in order to deliver an above-inflation return in all market conditions. Their sales pitch is that while they mightn’t knock the lights out in terms of growth, they will keep volatility low.
Absolute returns funds aren’t for everyone (Moneycube generally prefers a conventional multi-asset approach). But they can’t be ignored – Standard Life’s Global Absolute Returns Fund is the biggest investment fund in the UK, holding a whopping £22 billion of assets.
Moneycube can provide absolute returns funds from Friends First, Zurich Life, Aviva, New Ireland, as well as Standard Life’s GARS.
Don’t: Avoid all risk
For one thing, you can’t. If there was a risk-free option, we’d all choose it.
If you really can’t bear the thought your savings could fall in value, even for a short time, investing’s not the game for you.
Take a look at State Savings or bank deposits which can guarantee your deposits.
But remember, trying to avoid all risk will almost certainly cost you.
Leaving all your money in a deposit account might seem the low-risk choice. But over the years, inflation will erode the value of your deposit savings.
And we’ve written before about the hidden costs and risks of “capital protected” investments.
Instead of trying to avoid all risk, try Moneycube’s online investment advice platform to consider your risk appetite. We’ll work with you to find the appropriate low-risk investment fund for your needs.
Get started with Moneycube today.
