What are the best stock market sectors for cautious investors ?

There are as many types of investments, as there are investors.

When considering where best placed to place your money, it is usual to do a ‘risk profile questionnaire’ to establish your attitude to risk. Most financial advisers would run through this questionnaire and tell you if you are a cautious or more adventurous investor.

Cautious investors often include those with limited investment experience, or who have to reduce risk to their capital e.g. retirees.

Among the different asset classes it is easy to distinguish high and low risk. Cash and government bonds offer low volatility and relative protection of capital, however they do not normally achieve particularly high returns.

If you want to invest in the stock market, but also keep risk low, the sectors below have historically lower levels of volatility. Within those sectors the larger blue chip companies will generally produce more stable returns.

These sectors are ideal for cautious investors, who would still like some exposure to the stock markets.

  • Consumer Staples
  • Consumer Discretionary
  • Energy
  • Financials
  • Health Care
  • Industrials
  • Materials
  • Real Estate
  • Technology
  • Utilities

There is clearly a high degree of risk with any stock market investment. However, by diversifying your investments across a broad range of companies in these sectors, it is possible to reduce volatility.

Many fund websites publish historical sector performance, and allow you to select investment funds by sector. Trustnet have a good 5 year overview of investment sector performance

All investments carry risk to capital, and in all circumstances professional advice should always be sought. This website is for entertainment purposes only, and no actions should be taken based on any of its contents. Always seek independent professional financial advice, before making any financial decisions.

There will always be less volatile sectors than others. Certain types of companies have more predictable revenues, earnings and dividends. For example the consumer staples sector produces products that consumers want in all economic climates. No matter what the state of the economy there will always be a demand for toiletries, food, and beverages etc.

About the author

Trading and Investment

Traded the markets for over 15 years, including Commodities, Bonds, Currencies, Equities, and Indices. I have also worked as a Chartered Financial Planner.
CeMAP, CeFA, DipFA, AdvDipFA, Ba(Hons) Economics, Chartered ALIBF

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