Not a risk taker? Here’s where to invest your cash

Stock markets are close to record highs and other assets look expensive. Laura Suter suggests some safer homes for your money

Share prices have repeatedly hit record highs recently in what has been termed “the most hated bull market in history”. Many investors feel nervous that we’re on the cusp of a market fall, so where should these risk-averse savers put their money?

Cash is the usual safe haven in times of market stress or when investors get wary, but record-low interest rates on cash accounts and rising inflation, currently at 2.6pc, mean cash savers are losing money in real terms. So where should the reluctant investor go?

“I have a lot of sympathy for investors at the moment; there is plenty to concern them, chief among them the fact that everything is expensive,” said Sheldon MacDonald, the chief investment officer at Architas, an asset manager. “And you don’t want to buy into something that is already expensive as there is the obvious danger of prices falling.”

He added that geopolitical risks, such as President Trump’s unpredictability, Brexit and threats from North Korea, were additional reasons for investors to worry.

However, those who invest for the long term should not be fazed by any short-term falls, said John Husselbee of the asset manager Liontrust.

“The long-term benefits of investment should reassure reluctant investors, but if there are still concerns, then ‘pound cost averaging’ – investing at regular intervals rather than in a lump sum – is sometimes a suitable solution,” he said. This ensures that in the event of a slump you at least buy some shares cheaply.

For many investors wary of stock market falls, bonds would be the next logical investment. But Darius McDermott of Chelsea Financial Services, the fund shop, said: “The trouble is that bonds look anything but low-risk at the moment. They have enjoyed a 35-year bull market. They are expensive and investors could easily lose some of their capital if and when interest rates rise again.”

One option is to use a “strategic” bond fund, where the manager can switch between many different types of bond to maximise returns and minimise risk. The TwentyFour Dynamic Bond fund is one example; it features in the “Telegraph 25” list of preferred funds.

For those wary of having to choose between various assets, an alternative is “absolute return” funds, which have the ability to invest in a variety of different assets, although they will still typically have some of their money in the stock market.

Mr McDermott recommended Henderson UK Absolute Return, which has the ability to “short-sell” shares and so make money if prices fall. He also tipped Church House Tenax Absolute Return Strategies, which cannot short-sell but is “one of the few in the sector to target an absolute return from diversification and risk management alone”.

Jupiter Absolute Return and Old Mutual Global Equity Absolute Return both have a very low correlation with wider stock markets, Mr McDermott added. Both funds have the ability to short-sell.

If investors are nervous of a crash, having cash handy could help, said Mr Husselbee. It would allow them to buy assets cheaply after the fall, although he admitted that many investors were often too fearful to do this.

Those who fear a fall can protect themselves by investing regularly