The main low and zero risk options...

• Money in the bank or building society.
• Some NS&I products
• Funds with capital guarantees
• Capital not at risk structured products
• Gilt edged stocks
• Low volatility investment funds

Uses of low or very low risk investments

The only type of investment considered to be "completely safe" is money on deposit in a bank or building society within Financial Services Compensation Scheme limits, and some government NS&I products.

Typically you should have between three and six months income in the bank as a rainy day fund that you can access easily to pay for unforeseen expenses, perhaps more if you are retired or approaching retirement. This should be your first investment priority.

It's also OK to keep money in the bank if it is for a specific purpose, and you are likely to need it fairly soon (saving for a deposit on a house for example).

Holding money in the bank beyond this leaves you open to something called "inflation risk" in the long run:

The value of your savings can be eroded over time as prices rise. For example, £100 kept in the bank since 1945 with gross income reinvested would be worth only £250 today in real terms adjusted for inflation. By comparison, a mixed portfolio of shares in major UK companies would be worth £3100 in real terms adjusted for inflation. More than a 10 fold difference. Source, Barclays.

So beyond your rainy day fund the aim is to balance risk and potential return to see if you can at least ensure your savings keep pace with inflation; and hopefully show a positive return above this over time. This normally involves at least some exposure to stock markets that have in the long run performed far better than keeping money on deposit in the bank or building society.

Some of the low or zero risk options mentioned above can be used to help achieve this aim, they combine exposure to stock markets whilst protecting the value of your original investment. They may be suitable for you if you would like to take little or no risk with your original capital.

You can follow the links to the left if you would like to know more about them. Alternatively feel free to contact us with your questions.