Lower-risk options for those wanting more than cash savings

A good friend, fellow millennial and loyal reader of the millennial series recently told me that she’s planning to open her first ISA (yay!) but still feels intimated by investing and so is considering a cash ISA with her bank instead of stocks & shares to dip her toe. Wanting to keep the money invested for at least the next 3 years, and a naturally risk averse person, I wanted to see what other options were available to her.

FundCalibre has 22* Elite Rated lower-risk funds that have the potential to outperform the 1.7% fixed rate cash ISA she is considering. These 22 funds range from property to multi-manager to bonds so there’s quite a few asset classes from which to choose and possible create a small portfolio that could still be within her level of risk tolerance and time horizon.

‘In investing, what is comfortable is rarely profitable.’
– Robert Arnott, American entrepreneur

When you look at the investment risk spectrum, cash is always the lowest risk option: you won’t lose your money – the only risk is that you don’t make much either, and it possibly doesn’t keep up with inflation, meaning your £1,000 today buys you less in the future.

Next up are bonds. While they are deemed less risky than equities, you can lose money still. But they do have the potential for capital growth and usually provide a yield that is higher than the interest paid on cash accounts. Baillie Gifford Strategic Bond is worth a look.

As we’ve seen from our previous research, millennials are increasingly interested in sustainable investing and for the risk averse, Rathbone Ethical Bond could be an option.

Watch our interview to learn more about Baillie Gifford Strategic Bond investing in retail bonds such as Netflix, PureGym and Wagamama

If you don’t fancy bond funds, another option is multi-asset funds, which are often popular with first-time investors as smaller sums of money can be spread across different assets classes, giving some helpful diversification and reassurance that your ‘nest-egg’ is not in one basket so to speak.

Rathbone Strategic Growth Portfolio, which holds 59% in equities**, or Premier Multi-Asset Monthly Income, which sits in the IA Mixed Investment 20-60% Shares sector meaning it can hold between 20-60% equities, are two such examples.

Making your first investment can be daunting, but once you’ve taken that first step it can not only be very rewarding, but interesting too.

Top five best performing lower risk* Elite Rated funds over three years***

PositionNamePercentage returns***
1Rathbone Strategic Growth Portfolio8.35%
2Baillie Gifford Strategic Bond6.21%
3Premier Multi-Asset Monthly Income6.14%
4Rathbone Ethical Bond5.93%
5BMO MM Navigator Distribution5.32%

*Elite Rated funds with a FundCalibre risk rating of 3.5 or less
**Fund factsheet, 30 April 2019
***Source: FE Analytics, total returns in sterling, 13 June 2016 to 14 June 2019

 

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice. Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.