Investors who want to invest in low risk investments will get a “bigger bang for your buck” than those who are looking to invest heavily in high risk assets, a new study has found.
The research, conducted by investment consultant PwC, found that the average return for low- and moderate-risk assets is 25 per cent and 30 per cent respectively.
It also found that, compared to those looking to make money in the sector, low- or moderate-return investors are likely to be more likely to choose to invest on a lower-risk basis.
The study, entitled Low- and Moderate-Risk Investing, found investors are making more money with low-cost investments and more with high-cost ones.
Read more: The biggest threat to low-return investment opportunities is a lack of awareness of low-value investment opportunities, according to the report, which was published today by PwCo’s Research & Investment Practice.
Investors who look for low returns are likely also to invest more in low and medium-risk investment vehicles, PwLNP analyst Peter Breen said.
Low-risk investing is where you are investing in low interest rates, a stable price, and that allows you to be exposed to a large amount of money over a period of time.
“It is a great opportunity to invest where the risk is low and the returns are high,” he said.
PwC research shows investors who are less familiar with low and moderate risk investments are more likely than those with more expertise to invest less.
Low-risk investors are also more likely for them to be able to hold on to their savings in case of financial shocks, PWC said.
It recommends that low-or moderate- risk investors should consider investing in a diversified portfolio.
It also recommends that investors should look to diversify their investment vehicles.
In a nutshell, the PwCs research shows that people who have a high level of exposure to low risk assets are more comfortable in low cost investing vehicles and are more willing to accept lower returns, and low risk investors are more confident in high cost investment vehicles and willing to pay higher returns, Mr Breen explained.
This is also a key reason why low risk investing is attractive to those who want a bigger return on their investment, he said, while high- risk investing could be an attractive investment for those who can only afford to take risks.
The PwCI study found that low risk and moderate risky investments were not mutually exclusive, and both can be useful investments for those looking for a return of 10 per cent or more, Pwdc managing director Paul Cope said.
“It’s not the case that low and high risk are mutually exclusive,” he added.
“The key is to understand what type of risk you’re willing to take, and then choose the type of investment vehicle that works for you.”
The study found low risk investment vehicles are more suited to people who need to diversified portfolios with the ability to hold a variety of assets and make regular, consistent payments.
This type of portfolio can also provide a high return of around 15 per cent to 15 per to 20 per cent.
High-risk strategies are more suitable for those with a high risk tolerance and are suitable for people who can pay high fees, Pwyck Cope added.
“Low risk investments can offer a return that is around 10 per per cent in a low-interest-rate environment, while moderate risk investment is ideal for people that are looking for lower rates,” he explained.
“For low risk people, there are a number of different strategies that can be used, including diversification, in the form of a tax-free account, or a low interest-rate portfolio, or the investment vehicle can be the investment vehicles.”
Pwyck Breen, the managing director of Pwc Research & Investments, said investors should be aware that high-return investing is a high-interest investment and should look for the low-income investors who can afford to pay a high fee and can also benefit from diversification.
There are some opportunities for low risk in the low income groups, he added, and investors should also be aware of what types of investments work best for low income individuals.
Mr Breen suggested that low income people should also look at investing in their own retirement savings and consider saving for a long-term retirement, in case they may need to retire early.
He also recommended that investors look for ways to make the transition from low-to-high-risk invested vehicles, which are more sustainable and easier to manage, so they can reinvest in high value asset classes.