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Best Low-Risk Investments UK

Tobi Opeyemi Amure
Reviewed by:
Best Low-Risk Investments UK

In the world of investing, there’s always a trade-off between risk and reward.

While everyone dreams of high returns, it’s also crucial to protect your hard-earned savings.

My article delves into the best low-risk investments in the UK, offering insights into their characteristics, advantages, and disadvantages.

By the end of this guide, you should have a clearer understanding of how to safeguard your investment capital while earning reasonable returns.

This article was reviewed by Tobi Opeyemi Amure, an investing expert and writer at, and

1. Savings Accounts

Savings accounts are an elementary form of investment that most people are familiar with. Offered by banks and building societies, these accounts provide a secure place to store money while accruing interest.


  • High Liquidity: You can withdraw your money anytime you need it.
  • Government Protection: Savings accounts in the UK are protected up to £85,000 by the Financial Services Compensation Scheme (FSCS).
  • No Special Knowledge Required: Ideal for beginners or those who don’t want to delve into more complex investment vehicles.


  • Low Interest: The interest rates are generally low, particularly in a low-interest-rate environment like the present.
  • Inflation Risk: With low returns, you risk your money’s purchasing power diminishing over time.

Who Should Invest

For people who are risk-averse or who might need their funds on short notice, a savings account offers unmatched liquidity and safety.

However, don’t expect your money to grow significantly in a savings account. It’s more about preservation than growth.

2. UK Government Bonds (Gilts)

Gilts are debt securities issued by the UK government. By purchasing a Gilt, you’re essentially lending money to the government, which promises to pay a fixed interest rate over a predetermined period, followed by the return of the principal amount.


  • Safety: Gilts are backed by the government, making them extremely secure.
  • Regular Income: You’ll receive regular interest payments, usually every six months.


  • Low Yield: Typically, Gilts offer a lower return compared to other investments.
  • Interest Rate Risk: If interest rates rise, the market value of your Gilts may fall.

Who Should Invest

Gilts are often favored by retirees or those close to retirement who are more concerned with preserving their capital than with high returns. They’re also useful for diversifying a riskier investment portfolio.

3. ETFs (Exchange Traded Funds)

Exchange-Traded Funds (ETFs) are similar to mutual funds but are traded on stock exchanges like individual stocks. They often track a particular index, sector, or commodity.


  • Diversification: Most ETFs hold dozens or even hundreds of stocks or bonds, reducing the risk of any single asset harming your overall portfolio.
  • Low Cost: ETFs typically have lower fees than mutual funds.


  • Variable Risk: Not all ETFs are low-risk; it depends on what the ETF is designed to track.
  • Trading Costs: Because they’re traded like stocks, you may incur trading fees.

Who Should Invest

ETFs are good for investors who wish for something that combines the diversification of mutual funds with the flexibility of individual stocks. They can be a useful part of a low-risk investment strategy, especially when they track low-volatility indices or sectors.

See also: How to invest in ETFs

4. Corporate Low-Risk Bonds in the UK

Corporate bonds are loans to companies in exchange for regular interest payments and the promise to return the principal at the end of the bond’s term.


  • Higher Returns: Corporate bonds generally offer higher returns than government bonds.
  • Selection: There’s a wide variety of corporate bonds, making it easier to find one that fits your risk profile.


  • Credit Risk: Companies can default. Though low-risk corporate bonds are less likely to do so, the risk is not zero.
  • Interest Rate Risk: Like Gilts, corporate bonds are also susceptible to interest rate changes.

Who Should Invest

Corporate low-risk bonds could be a fit for those who are willing to take a little extra risk for a better return than Gilts but still want a relatively safe investment.

They are also good for diversification in a portfolio heavy on stocks or government bonds.

5. Money Market Funds

Money market funds invest in short-term debt instruments like Treasury bills and commercial paper. They aim for stability and liquidity.


  • Liquidity: These funds offer almost immediate access to your money.
  • Stable Value: The primary goal is to maintain a stable value, usually at £1 per share.


  • Low Returns: Money market funds typically yield slightly more than savings accounts but less than bonds.
  • Not Insured: Unlike savings accounts, they’re not insured by the FSCS.

Who Should Invest

If you’re looking for a place to park your emergency fund or need a short-term investment option, money market funds could be right for you.

6. Annuities

Annuities are contracts with insurance companies. You pay a lump sum upfront or a series of payments, and in return, you receive regular disbursements, either immediately or at some point in the future.


  • Guaranteed Income: Annuities can provide a guaranteed income stream for life or a set period.
  • Tax Benefits: The money in an annuity grows tax-deferred until you start making withdrawals.


  • Complexity: Annuities can be complex, with various fees and restrictions.
  • Lack of Liquidity: Early withdrawal can result in hefty penalties.

Who Should Invest

Annuities are best suited for individuals nearing or in retirement who want a guaranteed income. However, due to their complexity, consulting a financial advisor is advisable.

7. Preferred Shares

Preferred shares are a type of equity investment, a cross between common stock and bonds. They provide a fixed dividend before any dividends are given to common stockholders.


  • Steady Income: Preferred shares typically offer more reliable dividends than common stock.
  • Lower Volatility: They are generally less volatile than common shares but offer more growth potential than bonds.


  • Limited Upside: You’ll receive dividends, but generally, you won’t benefit from significant price appreciation.
  • Liquidity: They are often less liquid than common stocks.

Who Should Invest

If you’re seeking a consistent income but are willing to forego significant capital appreciation, preferred shares could be a suitable option.

8. Mutual Funds

Mutual funds pool money from many investors to buy a diversified portfolio of stocks, bonds, or other securities. They’re managed by professionals.


  • Professional Management: Your investments are managed by experts.
  • Diversification: With one purchase, you get a diversified portfolio.


  • Management Fees: These can erode your returns over time.
  • Potential for Underperformance: Not all funds outperform the market, and some may even do worse.

Who Should Invest

Mutual funds can be an excellent option for people who don’t have the time or expertise to manage their investments. They can offer good diversification with a single purchase but come at the cost of management fees.

What Is Investment Risk?

Investment risk refers to the probability or likelihood of the occurrence of losses relative to the expected return on investment.

Simply put, it’s the possibility that the actual returns from an investment will be different from the expected returns.

This deviation can be in the form of lower-than-expected returns or even a complete loss of the invested capital.

Different types of investments carry different levels of risk, and the potential for higher returns usually comes with higher risk.

Types of Investment Risks

  1. Market Risk: Also known as “systematic risk,” this is the risk that the entire market will decline, affecting almost all investments. Market risk cannot be eliminated through diversification.
  2. Credit Risk: This is the risk that the issuer of a bond or other debt security will default on their obligations.
  3. Liquidity Risk: The risk that you may not be able to buy or sell an investment as quickly as you wish due to a lack of buyers or sellers.
  4. Inflation Risk: The risk that the returns from an investment will not keep pace with rising consumer prices.
  5. Interest Rate Risk: The risk that changes in interest rates will adversely affect the value of an investment, particularly relevant for bonds.
  6. Political and Regulatory Risk: The risk that government actions could impact an investment. This is more common with investments in foreign countries.
  7. Tax Risk: The risk that tax laws will change in a way that is unfavorable to your investment.
  8. Reinvestment Risk: The risk that future proceeds from an investment may have to be reinvested at a lower rate of return than the investment originally yielded.
  9. Concentration Risk: The risk associated with putting too much of your investment into a single asset or a group of similar assets.
  10. Currency Risk: The risk that changes in currency exchange rates will negatively impact an investment.

Managing Investment Risk

Understanding and managing investment risks is a fundamental aspect of investing.

Diversification, or spreading your investments across various asset classes and geographic locations, is one of the most effective ways to manage risk. Another strategy is to match your investments with your risk tolerance and time horizon.

For instance, riskier investments might be more suitable for younger investors with a longer time horizon, while less risky investments are often recommended for older investors.

Investors can also use tools like stop-loss orders, options, and futures to manage downside risk, although these come with their own set of risks and costs.

It’s usually advisable to consult with financial advisors for a personalised risk assessment and investment strategy.

Should You Choose High or Low-Risk Investments?

The choice between high-risk and low-risk investments is highly individual and depends on a variety of factors such as your financial goals, risk tolerance, time horizon, and current financial situation.

Here are some general guidelines:

  1. Risk Tolerance: If you are uncomfortable with the idea of losing money and prefer stability, low-risk investments like bonds or savings accounts may be more suitable for you.
  2. Time Horizon: High-risk investments often need a longer time horizon to realise potential gains and recover from market downturns. If you’re saving for a long-term goal like retirement, you might be able to take on more risk.
  3. Financial Situation: If you already have a solid financial base and are looking to grow your wealth more aggressively, high-risk investments could be an option.
  4. Goals: If you are looking for capital preservation or consistent income, low-risk investments are generally better. High-risk investments are often chosen for capital growth.
  5. Diversification: A mix of both high-risk and low-risk investments is often recommended to balance risk and reward.

Consulting a financial advisor can help you assess these factors in detail and develop an investment strategy tailored to your unique needs.

Best Low-Risk Investments UK – Final Thoughts

Low-risk investments are an essential component of any well-balanced portfolio, especially for those nearing retirement or those who are risk-averse.

While the returns might not be spectacular, the primary aim is capital preservation, often with a side serving of moderate growth or income.

Always consult with a financial advisor to tailor an investment strategy that best suits your needs and risk tolerance.


*This is not financial advice.

Investments can fluctuate in value, possibly leading to a return less than the initial amount invested. Historical outcomes don’t guarantee future results.

Pensions are investments for the long haul. Their worth might vary, potentially affecting the pension benefits you receive. The income from your pension could be influenced by prevailing interest rates when you claim your benefits.

The content in this article is informational. Refrain from making decisions solely based on this information. Our comprehension of HMRC rules, as presented here, may change.


What is the safest investment with the highest return UK?

The term “safest investment with the highest return” can be a bit of an oxymoron, as higher returns usually come with higher risks. However, in the UK context, one relatively safe investment with potentially decent returns could be government bonds or Gilts. These are considered low-risk as they are backed by the UK government, and they typically offer better returns than savings accounts. Another option could be certain types of diversified low-cost ETFs that focus on stable sectors or bond markets. It’s crucial to understand that even low-risk investments carry some level of risk and returns can vary. For personalised advice tailored to your financial situation, consulting a financial advisor is recommended.

What is the safest type of investment in the UK?

In the UK, the safest type of investment is generally considered to be a savings account with a reputable, FSCS-protected bank. The Financial Services Compensation Scheme (FSCS) provides a safety net, protecting your deposits up to £85,000 per financial institution. Another very safe option is UK government bonds, also known as Gilts, which are backed by the full faith and credit of the UK government. Both of these investment vehicles offer low risk but also come with relatively low returns. Always keep in mind that “safe” doesn’t mean “risk-free,” and it’s essential to do your own research or consult a financial advisor for personalised advice.

What is the best and safest way to invest money UK?

In the UK, the best and safest way to invest money largely depends on your financial goals and risk tolerance. However, for a combination of safety and some level of return, consider diversifying your portfolio to include a mix of savings accounts, which are FSCS-protected up to £85,000, and UK government bonds, known as Gilts, which are considered low-risk. If you’re looking for a bit more growth potential while still keeping risk low, you might also include some diversified, low-cost ETFs focused on stable sectors or the bond market. Remember that even low-risk investments are not entirely without risk. Consulting a financial advisor for a tailored investment strategy is always a good idea.

How much can you earn on low-risk investments?

The returns on low-risk investments are generally modest and can vary depending on the type and economic conditions. Savings accounts often offer less than 1% interest, while UK government bonds may yield between 1-2%. Low-risk ETFs and corporate bonds could offer returns in the 2-5% range. Money market funds usually yield less than 2%. Annuities and preferred shares might offer slightly higher yields of around 3-6%. However, these are general figures and actual returns can vary. Taxes and fees can also impact your net returns.

Best low-risk investments UK for beginners?

For beginners in the UK looking for low-risk investments, savings accounts and UK government bonds (also known as Gilts) are straightforward options that offer capital preservation. If you’re willing to take on a slightly higher level of risk for potentially greater returns, consider low-cost ETFs that track broad market indices or focus on bonds. Money market funds are another option, providing slightly better returns than a savings account with relatively low risk. These investment vehicles are generally easy to understand and can serve as a good introduction to the investment world, allowing you to earn some return while keeping risk low. Always remember to consult with a financial advisor for personalised advice tailored to your situation.

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Will Fenton is the founder of Sterling Savvy. He is a personal finance expert and writes about trading, investing, budgeting, and other financial topics.

Along with his education in Economics & Finance, he has experience working in the financial services industry in London working for one of the UK’s leading financial companies, “a trustworthy and respected provider of news, education and market analysis for the everyday investor”.

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