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How to invest money: our investment portfolios

Use Which?'s unique investment portfolios to help you decide how to invest money and grow your savings over the long term. 

In this article
How to invest in the stock market The Which? investment portfolios What should I invest in? How does investment risk and reward work?
How long should I invest for? How do I choose investment products? Where should I buy investment products? How do I rebalance my investment portfolio?

How to invest in the stock market

Deciding how you can invest in the stock market is a daunting task, and one that can paralyse even the most ambitious amateur investor.

Never fear: Which? Money is here to help. 

We’ve built a set of investment portfolios designed to illustrate how you could spread £10,000 across several types of investment, or asset classes, depending on how much risk you are willing to take on or how much growth you hope to attain.

Our easy-to-use investment portfolios will show you:

  • How much they have gained annually on average;
  • How much you would have lost in the worst 12 month period over the past 20 years;
  • What your investment would be worth now if you had invested five years ago; and
  • The spread between best and worst results we think will capture 95% of the annual performance

Each portfolio has a different asset allocation and level or risk. Click through each one below to find out the mix of assets and more information about each portfolio based on 20 years of historical data.

We've given our portfolios a spicy theme - the hotter the chilli, the riskier your portfolio is going to be. 

The Which? investment portfolios

The Jalapeno portfolio

Average annual gain: 7.3%
Maximum historical one-year loss: 15.8%
Value if invested five years ago: £15,870.11
95% of annual returns between: +23.3% and -8.7%

The Cayenne portfolio

Average annual gain: 7.8%
Maximum historical one-year loss: 21.3%
Value if invested five years ago: £17,303.23
95% of annual returns between: +29.9% and -14.3%

The Scotch Bonnet portfolio

Average annual gain: 8.3%
Maximum historical one-year loss: 27%
Value if invested five years ago: £18,736.34
95% of annual returns between: +36.8% and -20.2%

The Habanero portfolio

Average annual gain: 8.7%
Maximum historical one-year loss: 30.2%
Value if invested five years ago: £19,895.72
95% of annual returns between: +41.5% and -24%

These portfolios don't constitute financial advice, but can act as a helpful starting point for a conversation with a financial adviser. Read our guide to financial advice explained for the best ways to find an adviser.

What should I invest in?

The portfolios include the main asset classes needed to properly diversify and spread risk, as well as grow your money in line with your attitude and risk tolerance. 

These are gilts (UK government bonds), UK corporate bonds, property, UK equity (shares), North American equity, European equity, Japanese equity, and emerging market equity.

Depending on your attitude to risk, your portfolio may include some or all of these asset types, as they have different levels of risk and move in different ways relative to one another.

If you’re already invested, take a look to see if the portfolio best suited to you matches the make-up of your existing portfolio. It’s possible you could be taking on too much or too little risk without realising.

The analysis is based on an initial investment of £10,000.


How does investment risk and reward work?

Risk and reward are intrinsically connected. The more risk you take on, the greater the potential reward. Conversely, as you strive for higher growth, the more you can potentially lose. 

We know that when you invest, you not only want to know how much you can potentially make but also how much you’re putting at risk. This is what the investment portfolios aim to do.

Each different type of investment carries a level of risk. The riskier the asset, the higher the potential return - and greater the potential loss. 

As the portfolios increase in risk and potential reward, so does the amount you might lose in a ‘bad year’. 

With the highest-risk Habanero portfolio, you should expect a fall in the value of the portfolio of 30% in that bad, one-in-twenty-year downturn.

We’ve looked at risk in terms of the volatility of the portfolio, the range of likely gains and losses, and the historical worst-case scenario. 

There’s always the chance things could go worse than expected: we’ve estimated there is a 95% chance that returns won’t stray outside the range stated for each portfolio in a given 12-month period, but there is a 5% chance that they will.

We think this is a sensible way of understanding the downsides as well as the upsides when you invest.

How long should I invest for?

The portfolios are built for long-term growth, and not designed for those looking to get an income from their investments. 

If you only have a short timeframe (typically five years or fewer) or don’t want to lose any of your capital, you should consider cash deposits and savings accounts, which don’t put any of your money at risk. Your cash will lose buying power however as inflation erodes its value.

Broadly, the asset allocation for each portfolio will remain the same, although they may shift over time depending on how volatile the underlying assets become. 

This is because historic volatility is one of the factors we look at when calculating riskiness, so if an asset becomes more volatile we may need to tweak the allocation to stay within the riskiness boundaries of that portfolio.

This is why it’s important to review your holdings every year – not much more than that, mind you – to ensure your portfolio isn’t drifting into something riskier than you are comfortable with.

How do I choose investment products?

The next step to take once you've decided on your ideal portfolio will be how to populate it with actual investments.

The easiest way of doing this is through investments funds, such as unit trusts, open-ended investment companies (Oeics), investment trusts and exchange traded funds. 

They're cost-effective, and allow you to further spread risk, compared to investing directly.

Remember, the management costs of your investments can have a big impact on their performance. 

We suggest you use low-cost tracker funds to fill up your portfolio, although some assets, such as property, may be better suited to higher-cost, actively managed funds.

Where should I buy investment products?

If you decide to invest alone, without the help of a financial adviser, you can cut the cost of investing in funds by using a fund supermarket or investment broker. 

These are online hubs that allow you to buy investment products and monitor their performance in a one-stop shop.

Because you're doing all the hard work of picking your investment, you won't be paying the fees associated with going through a financial adviser. 

Cutting these charges can have a significant impact on the performance of your investment portfolio over the long-term

How do I rebalance my investment portfolio?

You'll need to re-assess and rebalance your portfolio annually. Rebalancing is the process of bringing your portfolio back to its original asset allocation. 

This is necessary because, over time, your investments may fall out of sync with your original asset allocation; this tends to happen when one asset, usually equities, grows more quickly than the others.

For example, if UK equities represent 20% of your portfolio at the beginning of the year, but have grown in value to represent 30% at the end, you'll need to sell some of your UK equity holding and purchase more of an asset that's underweight to get back to your original allocation.

Try to resist the temptation to tinker with your portfolio, and rebalance after six months or a year. The Money Advice Service has some advice on assessing the performance of your investments.