What are fund risk ratings?

What are fund risk ratings?

Investing is all about risk tolerance and learning how to make sensible financial decisions. To get the most out of your investments, you need to know what kind of investor you are in the first place.

Are you totally risk-averse? Are you passive or active? Do you want to take full control or put your investments out of sight and out of mind?

To help you find out more about what kind of investor you are and what it might mean for your pension later on down the line, you may wish to check out this quick guide to fund risk ratings.

What is a fund risk rating?

In finance, a risk rating refers to how volatile an investment is, and it’s scored on a scale. Generally, the higher the number, the higher the risk. So on a scale of 1 to 7, 1 would be the least volatile investment, and 7 would be the most.

Highly volatile investments are incredibly risky, but the potential rewards are also much higher if the investment does well. On the other hand, investments with low volatility are classed as much safer and, as such, will have a lower rate of return.

How do fund risk ratings inform your investing?

You can use fund risk ratings to guide your investment choices depending on what kind of investor you are.

For more passive investors, investing in a known minimal risk asset may be preferable for the long-term approach. This way, you might be able to afford a more hands-off investment risk style. Passive funds are not necessarily lower risk by default. Many of them are still prone to rising and falling in value like most investments since they are generally tracker funds pitched against indices.

Often, passive investors aim to build wealth over time, so they tend to opt for safer investments that can offer a good return later on down the line.

Focusing on a larger timeframe may be a better way to prepare for the future, i.e., investing in a pension fund.

On the other hand, active investors will often monitor their investments closely in an attempt to capitalise on short-term market movements. Investing in higher risk assets could yield a greater return, but there is a higher chance of loss.


fund risk ratings


Active investors don’t have to be risky investors by any means. Some active investors may want to choose to invest in risk-free stocks, while others might want to check out the incredibly risky end of the scale for a potentially quicker return.

This style of investing usually requires a more expansive financial knowledge, and it often requires the use of specialised tools like analytical software. It also tends to be a much more hands-on affair.

Low-risk funds

Low-risk funds are generally considered as safer investments because they carry a greater chance of a steady return. They can also be less susceptible to external factors like market volatility.

Generally, they offer a lower return but a much more reliable one than their higher-risk counterparts.

Funds at the lowest end of the risk scale (ranked number 1) typically include investments like treasury funds or Stocks known as gilts.


Medium-risk funds are more prone to fluctuation than their low-risk counterparts, but they tend not to be as volatile as high-risk ones.

Investing in medium-risk funds means you need to be prepared to accept a certain degree of capital loss.


High-risk funds tend to have big earning potential in the short term, but when investing in them, you risk losing much more capital at the same time.

Examples of this would be cryptocurrency, stocks in a startup company, and possibly equity funds too.


Fund risk ratings


Our funds

At iSIPP, we offer individuals the opportunity to consolidate their pension funds into an easily manageable and accessible pot, allowing you greater control over how your personal pension is invested.

The scheme is highly flexible, and the way you invest and the amount of risk you’re willing to take is completely up to you. To help you get a better understanding of how your investments can perform, all of our funds are risk-rated and contain key information you’ll need to make the right decision.

You have the freedom to make the investment decisions that suit your needs, no matter what kind of investor you are. We recognise the immense importance of a dependable pension pot in retirement, and we’ll endeavour to offer you the freedom you need to thrive financially. If you want to get started, you can reach out to our friendly team here.


Learning how to manage your risk tolerance is an essential part of investing. When it comes to securing your financial future, it’s important to recognise the dangers of high-risk investments. Failing to do so could leave you with a shortfall (less money than you need) in retirement.




The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.

This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.

Apply now


Subscribe to our newsletter