How to choose a Ready-made Investment fund based on your approach to risk

31 August 2023

3 minute read

We explore how you can match your approach to risk to your investments.

Who's it for? All Investors

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

Please bear in mind that tax and pensions laws can change and that their effects on you will depend on your individual circumstances. We don’t offer personal advice.

How much risk to take is perhaps one of the most common wonderings for an investor.

Generally, the higher rewards on offer, the greater risk you must take. The price for this is living with a level of uncertainty that you could lose some of even all your money.

The problem

There’s no escaping risk, even if you stash your savings in a deposit account. Holding cash isn’t even without risk as it leaves you vulnerable to the effects of inflation.

Inflation erodes the purchasing power of your money over time, especially when the gap between interest rates and the rate of inflation is as it is today.

To get your money working as hard as possible to beat inflation, you’ll need to accept a greater element of risk, however.

The amount of risk appropriate for your investments should be shaped by your goals and circumstances. Though it’s also important to factor in your tolerance for risk, how you react to market ups and downs.

A popular way to manage the amount of risk you take is to invest in funds, rather than individual shares. Funds are where investors pool their money with others to invest in a broad mix of companies, reducing the impact on your money if one or two get into trouble. You can reduce risk further by choosing funds that invest across different assets, sectors and countries.

Investors must also balance the assets they hold, so as well as holding shares or funds, looking at bonds and cash if they wish. The balance will determine the level of risk your investments have which means that getting the selection of investments right is crucial to matching your portfolio to your own risk profile.

A solution

Investors who are ready to invest but unsure about getting the levels of risk right can use our Ready-made Investments.

There’s a choice of five funds, which all invest in a mix of shares, bonds and cash. Although they invest in shares, bonds and cash, they do this by buying other funds which focus on very specific types of these assets, and the amount invested in each will determine how much risk the fund will have. This is the key thing about our Ready-made Investments – it’s then up to you to decide which fund you think is most suitable based on how much risk you are willing to take.

What kind of investor are you?

Each of the five funds use Exchange Traded Funds (ETFs) and other passively managed funds to keep costs low.

At the less risky end of the scale there’s the Defensive fund which holds the highest proportion of bonds of the five options. The breakdown is 66% cash and short-term bonds, 16% bonds1 and 18% shares.

Next is Cautious which carries a slightly higher risk profile, but still at the lower end of the spectrum with 33% cash and short-term bonds, 29% bonds1 and 38% shares.

In the middle is Balanced holding 2% in cash and short-term bonds, 42% bonds1 and 56% shares.

Edging up there’s Growth which is higher risk, designed for those who’ll take chances if the potential pay-outs are worth it. It comprises 2% cash and short-term bonds, 25% bonds1 and 73% shares.

Lastly we offer Adventurous – our highest risk fund for those who can afford to take the biggest risk of loss for the chance of getting the biggest reward. It contains: 2% cash and short-term bonds, 9% bonds1 and 89% shares.

The numbers quoted for all funds may change as our experts make the most of short-term opportunities. But they give you an idea of the differences in approach for each fund.

The beauty of these funds is that there’s something for everyone, whatever kind of investor you are. Once you’ve chosen your fund, you can leave the rest to the professionals.

You may also be interested in

The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

Investment ISA

A simple and tax efficient way to start investing

Boost your savings by investing up to £20,000 in our Investment (Stocks & Shares) ISA per year completely tax-free.

If you've used your ISA allowance this tax year, you can open a regular Investment Account or transfer in another ISA to us.2


Self-Invested Personal Pension (SIPP)

A tax-efficient way to save for retirement

Our award winning Self-Invested Personal Pension (Best SIPP award 2022 at the Shares Awards) is designed to help you prepare for retirement.

Let us help you build your retirement pot and make your own investment decisions.