Low-risk investments

In a world of growing economic uncertainty, investors are clamouring for low-risk investments to protect their wealth, and precious metals like gold and silver could be the answer. Low-risk investment typically offer lower returns than riskier assets like stocks or cryptos, but have less volatile prices, and a better history of returns. Low-risk investments are typically suited to long-term investments as well, where time can help average out any volatility.

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Low-risk investments 2024

Stock markets have seen gains in recent months as markets expect interest rates to have peaked. Some have warned that stock gains are something of a bubble however, with most of the gains coming from just a handful of big tech companies, rather than a healthy growth of companies in general. Signs of a recession are simmering away under the surface, and stock bubbles eventually burst in highly dramatic crashes.

Cryptos saw significant volatility in 2023 and into 2024 with even mainstream tokens like Bitcoin crashing in price, and key platforms declaring bankruptcy. The confirmation of a Bitcoin ETF was hoped to bring some mainstream appeal to the asset, and the price did rise initially, but has since pulled back as of January 2024. As such, stocks and cryptos look unlikely as low-risk investments in 2024.

Alternative, low-risk options like ISAs might seem an effective way to safely invest your money but, as BullionByPost have reported here, ISAs offer little to no return in real terms. When considering inflation, an ISA could even lose you money! Interest rates currently sit at 5% but are expected to have peaked, with cuts possible in 2024. While ISAs remain a low risk option, the rewards rarely keep up with inflation.

As the chart above demonstrates; a £10,000 investment put into an ISA, versus the same £10,000 put into gold, would have yielded significantly lower returns over the same period of time. Gold performed better in the long-term, all with no counter-party risk of a potential bank collapse, such as seen with some banks in March of 2023.

Even buy-to-let properties, considered a safe investment for years, are at greater risk than ever. High costs and recent legislation changes reduce the potential to earn. While the pandemic has helped push prices to new all-time highs, rising inflation and interest rates now look set to push house prices down for the first time in years. Read more about gold vs buy-to-let properties.

Other low-risk investments, like bonds and peer-to-peer lending, put you at the mercy of lenders defaulting. Although banks and financial institutions have safeguards in place, they can only do so much to protect against a company or individual that folds.

For someone wanting a low-risk investment, but with the potential to make gains far above the other options, gold could be for you.

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Low-risk investments UK

View our live gold price chart

The chart above shows the price of gold in Pound Sterling for the past 20 years. While there have been key peaks and troughs over the years, the general trend has been a steady rise. It is for this reason gold is considered a safe haven, and a low-risk investment. As a physical commodity it has an intrinsic value.

Gold’s scarcity and incredible range of uses are fuelling a growing demand for the precious metal. Read more about why you should buy gold.

The price of gold is protected, and even bolstered, in more ways than many other investments. ISAs are not a limited commodity – banks can set up as many ISA accounts as they wish – and they are still ultimately controlled by those banks; if economies crash then the rates crash with it. No one will forget the scenes of customers queuing outside Northern Rock in 2007, desperate to withdraw their money; how low-risk would an ISA have seemed in those days?

Gold’s price is therefore protected by both its finite nature and investor confidence. When economies are doing well, gold continues to perform well based on supply and demand from industry and general use. When economies crash, the price of gold does better, as investors flock to such a safe haven asset, driving demand even higher than normal.

Gold’s physicality should not be underestimated either. Owning physical gold is low-risk compared to any electronic fund. Even ‘cash’ in a savings account is electronic at its core, and is subject to the control of the bank or investment company that holds it for you. Gold that you can physically hold and store is always under your control, making it safer and easier to liquidate when the time comes to sell.

No investment is risk-free; legislative changes, political upheaval, or simple value fluctuations can all have some effect on how much money an investment could make, but gold can mitigate some of these risks.

The goal of any investor should be, ultimately, to have an investment portfolio that is diverse. The best way to reduce risk is to spread your money across several assets; this way, should one asset unexpectedly underperform, it will not put a large portion of your investment at risk. A diverse investment portfolio, that includes a physical asset like gold, is the best low-risk investment.