Mia from Chip here (second from left).

January has been a massive month for us, because we crowned our first-ever £250k Grand Prize winner. Her name was Lisa. She cried. I cried. We all cried.

We invited her to a beautiful countryside hotel near her home in Hampshire, where we let her know she was the lucky winner of our December draw. Having been a loyal Chip user since 2018, Lisa grew her balance over time – building up 6,326 entries along the way.  

Her words stuck with me:

“I’m proof real people win.”

And honestly, watching her realise it in that moment was something I’ll never forget.

She told me she’s going to use the money to pay off her mortgage, pay towards her stepdaughter’s wedding, help put her 16-year-old through uni – and even retire early.

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Watch the full reveal video below:

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Lisa’s win was the headline – but she was one of 11,000+ winners in the draw, and nearly 40% of winners had never won before. In fact, 16% of everyone who entered took home a win.

And if you’re feeling a tiny bit jealous of Lisa (we certainly were), then there’s good news: we’re doing it again!

We’ll be announcing another £250,000 Grand Prize winner at the end of our £500k March draw (entries close 31 March 2026). T&Cs, eligibility criteria and minimum average balance of £10 apply.‍

Any entries you earn in our January and February draws also count towards the March £500k one, so keeping money in your Prize Savings Account really does matter.

Lisa was first, but you could be next. Enter here.

Thanks,
Mia from Chip

We are taking the app offline during the night (10:30pm - 1am) on Tuesday 20 January 2026 to perform essential maintenance.

During this time, you won't be able to open your Chip app to access your account, or make any deposits or withdrawals.

This won’t affect your balance or any pending transactions, and normal service will be resumed early morning on Wednesday 21 January 2026.

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What we’re doing

We are making some software updates and routine security upgrades.

We need to temporarily take the app offline to ensure minimal disruption to payments and processes, and we’re working through the night to limit the impact to Chip members.

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We’re here to help

If you have any questions, the team will be happy to help. Simply hop into your in-app chat, or drop us a line to hello@getchip.uk.

Why do people invest in gold?

Gold has held its appeal for thousands of years and for good reason. It’s often viewed as a safe haven¹ (prices can fluctuate) investment that people turn to during periods of uncertainty.

Here’s why it continues to attract attention from investors:

• Store of value: In times of economic crisis or market downturns, gold tends to retain its worth better than riskier assets.
  
• Hedge against inflation: When inflation rises and currency loses purchasing power, gold has historically maintained or increased its value – acting as a financial hedge.²
  
• Diversification: Gold doesn’t typically move in the same direction as stocks or bonds, making it a useful addition to a balanced portfolio.

¹Investopedia

²Investopedia

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How to invest in gold in the UK

There are several ways to gain exposure to gold, depending on your preferences, budget, and investment goals:

1. Physical gold

• Pros: Tangible, recognised globally, no counterparty risk (the chance that a party to a financial transaction, like a loan, investment, or trade, will fail to fulfill its obligations, potentially leading to losses).
  
• Cons: Needs safe storage, insurance, can be less liquid than other options.

2. Gold ETFs, Gold ETCs and funds

• Pros: Simple, cost-effective, easy to buy/sell like stocks.
  
• Cons: Doesn’t give you access to physical gold. May involve price tracking errors or management fees.

3. Gold mining stocks

• Pros: Potential for higher returns if gold prices rise.
  
• Cons: Company-specific and operational risks. 

4. Gold savings accounts or digital vaults

• Pros: Fractional ownership (an option to share between a number of investors), digital ease, lower entry point.
  
• Cons: May have account or withdrawal fees, and depends on provider trustworthiness.

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Risks and disadvantages of investing in gold 

Like any asset, gold has its downsides. It’s important to understand these before diving in:

• No income: Gold doesn’t pay dividends or interest – returns are confined to price growth (may be subject to Capital Gains tax).
  
  
• Price volatility: Despite its ‘safe haven’ label, gold can still fluctuate in value based on market sentiment, interest rates, or geopolitical news.
  
  
• Storage and insurance costs: Holding physical gold securely often comes with extra fees and responsibilities.

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Historical performance of gold

Gold has historically provided moderate long-term returns, though it can go through extended periods of underperformance. Over the past 20 years, gold has returned an average of ~12% per year.¹

^‍It has historically performed best during:

• Inflationary periods
  
• Currency devaluations
  
• Market shocks or crises
  

¹ J.P. Morgan

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Investing in other precious metals and commodities

Gold isn’t the only option when it comes to tangible assets. Other precious and industrial commodities can also play a role in your strategy.

Precious metals:

• Silver – More volatile than gold, with both monetary and industrial demand.
  
• Platinum & palladium – Used in manufacturing and clean energy tech, offering unique demand drivers.
  

Broader commodities:

• Oil & natural gas – Linked to global energy prices. Prone to sharp swings but still essential to global economies.
  
• Agricultural commodities – Wheat, coffee, sugar, and livestock can offer growth tied to global supply/demand shifts.
  

These can help hedge against inflation or add exposure to global growth – but also carry distinct risks based on weather, politics, or regulation.

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How to invest in commodities in the UK

You don’t need to stockpile barrels of oil or coffee beans to invest in commodities. Here are some beginner-friendly ways to get started:

• Commodity ETFs/ETCs – Track the price of specific goods or baskets of commodities (e.g., gold, oil, agriculture).
  
• Futures contracts – More advanced and high risk – these involve speculating on the future price of a commodity.
  
• Commodity-producing companies – Invest in miners, energy producers, or agricultural businesses.
  
• Physical metals – As mentioned, physical gold or silver remains popular for tangibility and trust.

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Gold and commodities in a diversified portfolio

Commodities behave differently than traditional assets like stocks and bonds – so they can add balance to your portfolio.

They’re often non-correlated, meaning they may rise when stocks fall (especially during inflation, currency shocks, or geopolitical events).

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Investing in gold and commodities summary

Gold and other commodities can be powerful tools for diversification, especially in uncertain economic times.

They don’t generate income like stocks or bonds, but they can help protect against inflation, currency weakness, or financial market shocks.

The right amount for your portfolio depends on your goals, risk tolerance, and time horizon. However, even a small allocation can go a long way in building resilience.

In the next guide of the series we take a closer look at cryptocurrencies and how they work. 

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FAQs

How can a beginner invest in gold?

ETCs, ETFs and other digital options can be great starting points due to their accessibility, low cost, and simplicity.

How do you invest in gold in the UK?‍

‍Options include buying physical gold (bars, coins), investing via ETCs, ETFs or funds, purchasing mining stocks, or using digital vault platforms.‍‍

Is gold the best investment?

Gold is a defensive asset so it can protect against market shocks. Best used as part of a wider, diversified portfolio.

What’s the difference between investing in gold and silver?

Gold is more stable and seen as a store of value. Silver has greater industrial use, tends to be more volatile, but can offer higher returns under certain conditions.

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Direct investment into gold and commodities is not available via the Chip platform.

Several forces are pushing gold higher:

• Global uncertainty: Concerns over U.S. monetary policy, rising trade tensions, and inflation are driving investors toward safer assets. Just in case.²
  
  
• Central bank buying: Countries like China, India, and Turkey continue to stockpile gold, reinforcing its role as a long-term store of value.^{3
  ‍}
• ‍Weaker dollar & rate cut bets: Investors are anticipating future rate cuts, making non-yielding assets* like gold more attractive.⁴

‍*Chip explains: Non-yielding assets are investments that don’t pay you an income while you hold them, so their value comes from the price itself

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Why it matters for you

Gold’s latest rally is a strong reminder of why it has held its place in portfolios for centuries. It isn’t about explosive growth or short-term gains – it's about stability, protection, and balance. 

In times of uncertainty, gold can act as a hedge against inflation and market swings, helping to smooth out the bumps. Think of gold as the solid foundation that can support your more growth-focused investments. 

With prices now* at record highs, the message is clear: gold continues to earn its reputation as a safe haven. For investors, that means confidence that even when markets are unpredictable.

But always remember to take a balanced view. Past performance is not a reliable indicator of future results and the price of gold can go down as well as up.

‍*Accurate as of 2 September 2025 spot gold price at $3,529.01 per ounce.
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How Chip can help you take advantage

At Chip, we offer exchange-traded commodities (ETCs) such as Physical Gold, which gives you a way of tracking the price and performance of the gold price, without the costs and admin of owning physical gold bullion. 

If you want to get involved, you can open a Stocks & Shares ISA in minutes. Invest from £1, and manage everything right from our app. Just go to the ‘Invest’ tab to get started.

Source: 1 BBC 2 JP Morgan 3 The National 4 The Economic Times 

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What is growth investing?

Growth investing targets companies that investors believe have the potential to grow faster than the broader market. 

These are often newer companies or those operating in rapidly expanding industries like technology, renewable energy, or healthcare innovation.

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Key characteristics of growth investing

• Emphasis on capital appreciation over income (e.g. dividends).
• Companies often reinvest profits to fuel future growth.
• Share prices tend to be more volatile but can offer higher returns over time.
• Commonly priced higher relative to earnings (higher P/E ratios).

Growth investing is typically more suitable for investors with a longer time horizon and a higher risk tolerance, as the payoff often comes from future potential rather than current earnings.

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What is value investing?

Value investing involves identifying companies that appear to be undervalued by the market. 

These are stocks trading below their intrinsic value based on fundamental analysis (like cash flow, earnings, or book value).

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Key characteristics of value investing

• Focus on finding stocks perceived as mispriced.
• Often includes established companies with stable earnings.
• Generally provides dividend income as well as capital growth.
• Less volatility, but potentially slower returns.

This strategy may appeal to more conservative investors looking for steady returns and lower downside risk.

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Examples of Growth and Value Investing

To better understand how these strategies play out in practice, consider how growth and value investors might view the same market differently.

Growth

• A growth investor may be drawn to a fast-growing technology firm that has yet to post consistent profits but is expanding rapidly, reinvesting all earnings into product development and market share. 
• Despite a high valuation relative to current earnings, the investor believes the company’s future potential justifies the price. Sectors like software, green energy, or healthcare innovation often fall into this category.

Value

• In contrast, a value investor might look for a well-established consumer goods company with stable earnings, consistent dividend payouts, and a share price that appears low relative to its earnings or book value. 
• The belief is that the market has temporarily mispriced the company, possibly due to short-term concerns, and that the share price will eventually recover as fundamentals prevail.

Both strategies can be applied using individual stock selection or through diversified investment funds, which pool companies with similar characteristics. 

Many UK investors use index funds or ETFs tailored to either value or growth styles as a simple way to gain exposure while mitigating individual stock risk.

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The Key Differences Between Value and Growth Investing

While both growth and value investing aim to build long-term wealth, they differ in philosophy, risk profile, and timing.

Growth investing is forward-looking. It relies on the market eventually rewarding companies for their innovation and rapid expansion. This often means accepting higher volatility and short-term uncertainty in exchange for the potential of above-average returns.

Value investing, on the other hand, is based on the premise that markets can misjudge a company's worth. By purchasing undervalued companies with strong fundamentals, value investors aim to benefit as the market corrects itself. 

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How to Decide if Value or Growth Investing Is Right for You

Choosing between growth and value investing depends on several personal factors:

• Investment goals: Are you aiming for long-term capital appreciation, or are you seeking steady income and lower volatility?
• Time horizon: Growth investing usually requires a longer time frame to ride out market swings. Value investing may suit those with a medium to long-term horizon looking for more stable returns.
• Risk tolerance: If you're comfortable with market fluctuations and are focused on potential gains, growth may appeal to you. If you prefer less risk and more predictability, value could be a better fit.
• Behavioural tendencies: Some investors struggle with holding onto volatile growth stocks through downturns. Understanding your emotional response to risk is just as important as the numbers.

In reality, many investors find a blend of both strategies provides balance, with growth driving long-term returns and value offering stability.

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Growth and value investing summary

Understanding the core principles of growth and value investing helps lay the foundation for a more thought out and tailored investment strategy. 

While growth investing seeks to capitalise on future potential, value investing focuses on capitalising on perceived mispricings today. Each has its strengths and trade-offs.

By aligning your personal goals, risk tolerance, and time horizon with the appropriate strategy, or combination, you can build a more resilient investment portfolio.

In the next guide, we’ll explore how you can begin to put these strategies into practice through building passive income, a key step in creating financial freedom and long-term wealth.

What are interest rates?

Interest rates are basically the price of borrowing money, or the reward you get for saving it. In the UK, the Bank of England sets something called the base rate, which influences how much banks charge on loans or pay on savings.

For example, if the base rate is 5%, your bank might offer a mortgage at 6% or a savings account at 4%. When rates go up, borrowing gets more expensive, but saving becomes more rewarding.

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Why do central banks change the interest rate?

Central banks, such as the Bank of England (UK), Federal Reserve (US) and European Central Bank (EU), adjust interest rates to keep inflation under control. They do this to try and maintain economic stability. 

• If inflation is rising too fast, rates are increased to cool spending.
• If the economy is slowing, rates are lowered to encourage borrowing and investment.

The goal is to strike a balance by encouraging growth without letting inflation get out of hand.

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How is the interest rate set?

In the UK, the Monetary Policy Committee (MPC) of the Bank of England meets around eight times a year to review economic conditions and vote on the base rate. They consider:

• Inflation (measured by CPI)
• Employment data
• Economic growth (GDP)
• Global market conditions

The rate they set affects everything from mortgage repayments to business investment decisions. 

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What happens to markets when interest rates rise?

Higher interest rates usually have a cooling effect on the stock market. This can include:

• Increased cost of borrowing, which can reduce company profits and consumer spending.
• Growth stocks, especially in tech or early-stage companies, often fall as future earnings are discounted more heavily. Understand growth investing. 
• Bond prices typically drop as new bonds offer better yields, making older ones less attractive.

Some sectors, like banks through savings accounts and products, may benefit, but overall, rising rates can signal tighter financial conditions. 

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What happens to markets when interest rates fall?

Falling interest rates usually encourage investment and spending. This can include:

• Companies can borrow more cheaply to grow operations.
• Consumers may spend more as loans and mortgages become affordable.
• Stocks often rise, especially in growth-focused industries.

Lower rates tend to push investors to seek better returns in the stock market as savings accounts offer low interest rates. 

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How can investors adapt to interest rate changes?

Adapting to interest rate shifts is key to managing risk and opportunity when it comes to investing. Some steps investors can typically take are:

• Diversify across various asset classes to reduce sensitivity to rate movements.
• Research and consider dividend-paying stocks or defensive sectors (sectors that typically provide essential goods and services that consumers will continue to purchase regardless of the economic climate) during periods of high rates.
• When rates fall, growth stocks and longer-duration bonds may offer better returns.
• Review your investment time horizon: short-term savers may prefer fixed-income products, whilst long-term investors could ride out market cycles and potential, although overall investing is for the medium to long term (5 - 10 years+). 

Being aware of how monetary policy affects asset prices can help investors stay aligned with their goals. 

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Interest rates and investing impact summary

Interest rates are a powerful economic lever that directly and indirectly shape the investment landscape.

For new investors, understanding their effects is a crucial building block for making smart, informed decisions. Learn about investing basics here. 

Next up: learn how stock markets tend to behave during a recession, and what that means for investors. 

How do ETFs work?

ETFs work by tracking a specific index, sector or asset class, and are traded on stock exchanges throughout the trading day, similar to individual shares. 

This means that prices fluctuate throughout the trading day, unlike mutual funds which are priced once per day at market close.

ETF prices fluctuate during the trading day based on supply and demand, giving investors closer visibility of performance. 

Unlike actively managed funds, most ETFs are passively managed, meaning they aim to track the performance of a benchmark or index, rather than trying to outperform it.

This usually means lower fund management fees, which can become expensive over the long term.

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Types of ETFs explained

There’s a wide range of ETFs available, covering just about every asset type, region, and trend you can think of. Here are some common categories:

• Stock ETFs – Track a group of company shares, often from a major index like the S&P 500 or FTSE 100. They offer broad market exposure in a single investment.‍
• Bond ETFs – Invest in a mix of government or corporate bonds, offering greater stability and often regular income through interest payments.
• ‍Commodity ETFs – Follow the price of physical goods like gold, oil, or agricultural products, either by holding the actual commodity or companies in the sector.‍
• Sector/Industry ETFs – Focus on specific areas of the economy, such as healthcare, technology, or finance, allowing you to invest in a theme you believe in.‍
• Thematic ETFs – Capture emerging trends like clean energy, electric vehicles, AI, or future mobility by investing across sectors aligned to a common theme.‍
• ESG ETFs – Invest in companies that meet environmental, social, and governance criteria – appealing to values-led investors, like the FTSE Global All Cap ESG.‍
• Crypto or Bitcoin ETFs – Provide exposure to digital assets like Bitcoin or Ethereum, often in a more regulated and accessible form than buying crypto directly.

‍

Why invest in ETFs?

ETFs have become a go-to tool for both new and experienced investors, for several reasons:

• Diversification – One ETF can hold hundreds of underlying investments, spreading risk across sectors, regions, or asset classes.‍
• Low fees – With most ETFs being passively managed, they typically come with lower annual costs compared to actively managed funds.‍
• Transparency – ETF holdings are usually published daily, so you can track price movements more closely. ‍
• Accessibility – Traded on major exchanges and available through investment platforms, you can invest in ETFs just like you would a single share.‍
• Passive investing – For those who want a simple, long-term approach, ETFs allow you to mirror entire markets or sectors without having to pick individual stocks.

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How can ETFs make you money?

ETFs can generate returns in two main ways:

1. Capital growth – If the price of the ETF rises (because the value of its underlying assets has gone up), you can sell your shares at a profit.
   
2. Dividends – Some ETFs distribute income received from the underlying assets, like dividends from shares or interest from bonds. Others are “accumulating” ETFs, which reinvest earnings automatically to prioritise growth. 

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How to invest in ETFs (UK)

If you're in the UK and want to start investing in ETFs, here’s how to get started:

1. Choose a platform – Use a UK investment platform like Chip.
   
2. Open an account – This could be a Stocks and Shares ISA to benefit from tax-free growth, or a General Investment Account (GIA), where proceeds are potentially taxable, subject to any annual exemption that may apply.
   
3. Find your ETF – Search by index, theme, or region. Many platforms offer filters and performance data to help you compare options.
   
4. Place your order – Decide how much you want to invest and place a buy order. You can invest a lump sum or set up a regular monthly investment.
   
5. Monitor your portfolio – Keep an eye on performance over time, and rebalance your holdings if your goals or risk appetite change.

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Risks of investing in ETFs

ETFs offer diversification, but they’re not risk-free. Here are some things to watch out for:

• Market risk – If the assets your ETF tracks fall in value, your investment will too.
  
• Liquidity risk – Some ETFs (especially niche or new ones) may not be easy to buy or sell at your preferred price.
  
• Tracking error – Occasionally, an ETF won’t exactly mirror the performance of its underlying index.

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ETFs summary

ETFs offer a flexible, low-cost way to invest in a wide range of assets.

Whether you’re just getting started or adding diversification to an existing portfolio, they provide instant exposure to markets and themes with relatively low effort.

But like any investment, it's important to research the ETF’s holdings, costs, and strategy before investing.

Our next guide covers commodities, and how physical assets can play a role in a diversified portfolio.

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FAQs

What is an ETF in the UK?

An Exchange-Traded Fund (ETF) is an investment fund traded on UK stock exchanges like the London Stock Exchange. It can track markets, sectors, or themes, and is used to build diversified portfolios at low cost.

Does an ETF pay dividends?

‍Many ETFs pay dividends. Look for “income” or “distribution” ETFs. Some ETFs reinvest the earnings automatically (these are called “accumulating” ETFs).

How do I invest in ETFs?

‍Open an account with a UK investment platform, choose a suitable ETF, and place a buy order. You can invest via a Stocks and Shares ISA to make it tax-efficient.

How much should a beginner invest in ETFs?

Start with what you’re comfortable with. The emergence of investing platforms means you can now start investing with very little – with Chip, you can get started with £1. The key is consistency and focusing on long-term growth.

What does ETF stand for?

‍ETF stands for Exchange-Traded Fund – a type of fund you can buy and sell like a stock, offering instant diversification across markets or sectors.

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Seccl Custody Limited is the ISA Manager for the Chip Stocks and Shares ISA. A monthly or annual ChipX membership is required for certain funds selected within a Stocks and Shares ISA. Fund management charges apply ISA limits apply.Invest £20k per tax year. Tax treatment depends on individual circumstances and may be subject to change in the future.

GIA proceeds are potentially taxable, subject to any annual exemption that may apply.

‍Investment into cryptocurrency ETFs is not available via the Chip platform. Chip offers investment funds that invest in different assets as a collective investment.

How do bonds work?

When a government or company needs to raise money, it can issue a bond. As an investor, you lend them a set amount and they agree to pay you a fixed interest rate (called the coupon) every year e.g. 3%. 

After a set number of years (the term), they pay you back the £1,000. This is known as the bond lifecycle: 

1. Issuance – You buy the bond (or a fund that holds bonds). 

2. Interest payments – You receive regular income, typically annually or semi-annually. 

3. Maturity – At the end of the term, the bond is repaid in full. 

Bond prices can also rise and fall in value if traded on the secondary market. FDor example, if interest rates change or the issuer’s credit rating shifts.

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Types of bonds explained

Here are the main categories of bonds you’ll come across: 

• Government bonds (gilts) – Issued by the UK government. Generally considered very low risk, but with lower returns. 

• Corporate bonds – Issued by companies to raise funds. Riskier than gilts, but they usually offer higher interest. 

• Green bonds – Used to fund environmentally-friendly projects. Growing in popularity among ethical investors. 

• Index-linked bonds – Designed to keep pace with inflation, as the payments rise in line with a price index like the CPI. 

• In the US: Savings Bonds, which are government-issued and often used for long-term savings goals. These differ from UK bonds in structure and taxation, and are only available to US citizens.

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Why invest in bonds?

Bonds can play a key role in a well-rounded portfolio. Here’s why: 

1. Income generation – Regular interest payments can provide a steady stream of income. 

2. Capital preservation – Bonds tend to be more stable than stocks, so they can help protect your investment. 

3. Diversification – Adding bonds can smooth out the ups and downs of a stock-heavy portfolio. 

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Risks and disadvantages of bonds

Bonds are lower risk than stocks, but not risk-free. Here’s what to consider: 

• Credit risk – The issuer might fail to pay interest or repay the loan (this is rare with government bonds, more possible with corporate bonds). 

• Interest rate risk – If interest rates rise, existing bond prices can fall. Inflation risk – If inflation outpaces your bond’s return, your real purchasing power can shrink. 

• Liquidity risk – Some bonds can be harder to sell quickly without losing value, especially in a downturn.

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How to invest in bonds (UK)

There are a few ways to invest in bonds as a UK investor: 

1. Bond funds or ETFs – These are collections of bonds bundled together, offering easy access and instant diversification. 

2. Direct purchase – You can also buy individual gilts or corporate bonds through some investment platforms. 

3. Use tax-efficient wrappers – Investing through a Stocks & Shares ISA or a pension (not available with Chip) helps you keep more of your returns. 

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How do I invest in bonds? 

Start by choosing a platform, selecting a bond fund or individual bond, and deciding how much to invest. Funds and ETFs are often easier for beginners.

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Who should consider investing in bonds?

Bonds can suit a wide range of investors, including: 

• Investors approaching retirement – Looking for steady income and capital protection. ‍
• Cautious investors – Seeking lower volatility than stocks. ‍
• Income-seekers – Wanting predictable returns through interest payments. 

If you’re someone with a lower risk tolerance or nearing a major financial milestone, bonds can provide valuable balance in your investment mix.

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Common bond-related terms explained

• Yield – The return you earn from a bond, usually expressed as a percentage.‍
• Coupon – The interest payment a bond pays, often annually.‍
• Maturity – When the bond issuer repays the original amount borrowed.
• ‍Par value – The bond’s face value, typically £100 or £1,000.
• ‍Credit rating – An assessment of how risky a bond issuer is. Higher ratings mean lower risk.
• ‍Bearer bonds – Rare today, these are unregistered bonds where whoever holds the paper owns the bond.
• ‍Duration – A measure of a bond’s sensitivity to interest rate changes.
• ‍Callable bonds – Bonds the issuer can repay early, which can affect returns.

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Investment bonds summary

Bonds are a type of investment where you lend money to a government or company in exchange for interest payments. 

They’re generally lower risk than stocks, making them popular for income, stability, and diversification. While they come with their own risks, like interest rate changes or inflation, bonds can play a key role in your long-term financial plan.

In our next guide, we’ll cover exchange-traded funds (ETFs), what they are, how they work, and why they’re one of the most popular investment choices for both beginners and seasoned investors. 

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FAQs

What are bonds in simple terms? 

Bonds are loans you give to a government or company. In return, they pay you regular interest and repay your money after a set time.

Are bonds a good way to invest? 

Yes, especially if you're looking for stability and income. They may not grow as fast as stocks, but they’re generally lower risk.

How do beginners invest in bonds? 

The easiest way is through bond funds or ETFs on an investment platform. You can also use a Stocks & Shares ISA to invest tax-free.

What are the disadvantages of bonds? 

Bonds carry risks like interest rate changes, inflation, and defaults. Some can also be harder to sell quickly if you need access to your money.

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Building a balanced portfolio

Building a balanced investment portfolio is key to smoothing out the ups and downs of the stock market, and ensuring that your long-term goals stay on track. Quick reminder: your portfolio (in investing terms) refers to all the different investment assets you own — stocks, bonds, ETFs, commodities etc. 

Spreading your investments between different assets can help mitigate against overexposure, if the price of a particular asset class suffers a downturn. 

‍

Focus on your financial goals first

Grounding your investment choices in your goals is a great way to get the most out of your portfolio. Whatever you’re investing in, it’s good to have an idea of why you chose a particular investment and what purpose it serves. 

Investing is best suited to those long-term goals, the outdoor office, that pricey furniture making course, Wimbledon final tickets, turning those big spends that feel out of reach now into your new standard of living. 

A balanced portfolio aims to give investors steadier, long-term growth, as mitigating risk between different assets has historically provided positive returns over a longer period of time. 

See our guide on retirement and long-term investing. You can track your goals and seamlessly link them to an investing account in the Chip app. 

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Assessing your investing risk tolerance

Determining your risk tolerance is key to balancing your portfolio. If you have a longer time horizon to invest, you may be able to tolerate some more risk, as historically markets have always trended upwards over time. 

If you’re approaching retirement, your risk tolerance may be lower as you get closer to your target date.

Some investors choose to allocate a greater portion of lower-risk assets like bonds or cash equivalents, with the aim of preserving capital.

On the other hand, those with more than ten years to stay invested, may take more risk; aiming for greater long-term growth despite short-term volatility.

The right balance depends on your comfort with potential losses, your financial situation, and how long you plan to keep your money in the market.

See our guide on risk, return and investing strategies for a deeper dive.

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Understanding asset allocation

Asset allocation is simply how you split your investments between different types of assets — like stocks, bonds, property, or commodities. Each type behaves differently over time.

• Stocks can offer higher growth potential, but also come with bigger price swings.
  
• Bonds usually provide lower, steadier returns and can act as a buffer during market downturns.
  
• Cash equivalents (like savings accounts) are the safest, but offer the lowest returns.‍
• Alternative assets (like gold or real estate) can add extra diversification.
  

Your mix of these assets should reflect both your goals and your risk tolerance. Someone with decades before retirement might have a higher proportion of stocks, while someone nearing retirement might hold more bonds and cash.

See our guide on asset classes for more details.

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Diversification

Diversification means not putting all your eggs in one basket. By spreading investments across different asset types, industries, and countries, you reduce the impact of poor performing funds dragging down your whole portfolio.

For example, if tech stocks are having a bad year, gains from bonds or commodities could help cushion the blow. A well-diversified portfolio aims to smooth out returns and make the ride less bumpy over the long term.

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Rebalance your portfolio regularly

Over time, some investments will grow faster than others, changing your original asset allocation. This “drift” can increase your risk without you realising it.

Rebalancing means checking your portfolio regularly, every six months or so, and moving money between assets to get back to your target allocation. It’s like course-correcting on a long journey to make sure you stay headed towards your goals. 

We have a whole series dedicated to various investment strategies that can help you stay on track.

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How to build a balanced portfolio summary

Balancing your portfolio starts with knowing your goals, understanding your risk tolerance, and picking an asset allocation that fits both. From there, diversifying and rebalancing are key to managing risk and keeping your plan on track.

Next up in this series: What is asset allocation and why it matters.