INVESTMENT CLINIC

I HAVE a bit of money to invest, but am not very comfortable with the idea of losing any cash. What are my options for an investment that guarantees to return at least the original amount I invest? A. E., via email. SO-CALLed risk appetite is one of the first things you should decide before investing money — that means working out how much of your cash you can stomach losing. If the answer is ‘none’, that’s fine.

Premium Bonds are a possible solution. They give you the chance to win money — though you might win nothing — but, crucially, promise to pay back your initial sum. Currently, it is estimated you’ll earn about 1.25pc on your money each year, if you have average luck.

A fixed-rate savings bond from a bank or building society is an alternative. These lock up your money for an agreed period and pay a set amount of interest over that time. Secure Trust Bank currently pays 2.01 pc a year over five years.

If you want to dip a toe into investing proper, then having a cash buffer might help ease your fears.

Tom Stevenson, investment director at Fidelity, says that having six months’ worth of savings before you start taking any risk could help psychologically because you know that, if you lose money, you’ve still got that sum stored safely.

After that, you need to choose lower-risk investments and be prepared to tie up your money for a minimum of five years to ride out any ups and downs.

An absolute return fund aims to produce a positive return whether the stock market goes up or down. They’re not designed to double your money overnight, and don’t always succeed in growing each year — but your money will be better protected than in most funds if the stock market dips.

You must research these carefully, as they all promise different things and some are riskier than others.

Mr Stevenson likes the Henderson UK Absolute Return Fund, which has delivered positive returns over five 12-month periods in a row.

Another option is a strategic bond fund. These invest in a range of bonds, such as Government gilts and corporate bonds issued by firms. The flexible approach of these funds mean they can pick the best time to invest in each different type of bond, or avoid a particular type altogether, rather than being tied to one sort all the time.

Mr Stevenson likes the Fidelity Strategic Bond Fund, which invests in government bonds in the UK, Canada and New Zealand.