Safe Investments: Understanding the Investment Risk Scale

What does investing safely actually mean?

There is no investment that is completely free of risk: even the most conservative alternatives are exposed to some form of loss, even if it is only loss of purchasing power. Talking about a "safe investment" only makes sense once you specify which particular risk you are more or less exposed to.

Before comparing products, it helps to distinguish six types of risk that, combined, determine the real exposure of any investment:

• Capital loss risk: the possibility of recovering less money than invested, or losing it entirely.
• Credit risk: the possibility that an institution or borrower fails to meet its payment obligations.
• Market risk: the possibility that the value of an investment falls due to changes in financial markets.
• Liquidity risk: difficulty recovering money when needed, or selling an investment without accepting a discount.
• Inflation risk: loss of purchasing power when returns fail to offset rising prices.
• Concentration risk: excessive exposure to a single company, sector, asset or investment type.

A product can have very low market risk and, at the same time, insufficient returns to preserve purchasing power. An investment with interest agreed by contract can still be exposed to the borrower not paying. That is why safety must be assessed by looking at all six factors together, not only at the advertised return.

What is the difference between risk and volatility?

Volatility measures how much an investment's price fluctuates in the short term, even if the capital is eventually recovered. Risk is a broader concept that includes, besides volatility, the possibility of default, lack of liquidity or permanent loss of the invested money.

Investment risk scale: from lowest to highest risk

There is no universal classification: the risk level depends on the conditions of each investment, the issuer and the time horizon. The table below compares the main alternatives from lowest to highest risk.

This classification does not replace individual analysis: public debt from an issuer with higher default risk can be riskier than that of another issuer with strong solvency. The goal is not to decide which investment is "better", but to understand what risks are taken at each level.

Level 1. Interest-bearing accounts and bank deposits

Interest-bearing accounts and bank deposits rank among the most conservative alternatives when held with a solvent institution and covered by the applicable deposit guarantee scheme. For investors resident in Spain, the Fondo de Garantía de Depósitos (FGD) generally covers up to 100,000 euros per holder and credit institution. Its main limitation is that the return may fall below inflation, and deposits may apply penalties for early withdrawal.

What happens if an institution is not covered by the Deposit Guarantee Fund?

If the institution is not a member of the applicable guarantee scheme, or if the balance exceeds the covered limit, the unprotected portion is exposed to that institution's credit risk in the event of insolvency. It is worth checking the coverage before depositing a large amount.

Level 2. Treasury bills and government debt

Treasury bills are short-term government debt instruments: the investor lends money to the state and receives the amount at maturity, usually issued at a discount. For Spanish-resident investors, this refers to Letras del Tesoro issued by the Spanish Treasury. Their risk depends on the issuer's solvency; if sold before maturity, the price may be lower than the purchase price, and the return may not offset inflation over the period.

Level 3. Money market funds

Money market funds invest in short-term debt instruments, aiming to preserve capital and offer a return in line with the money market, but they are not equivalent to a bank account or a guaranteed deposit. Their value can fluctuate and they carry credit, market and liquidity risk; before investing, it is worth reviewing the fund's policy, costs and redemption conditions.

Level 4. Fixed-income funds

Fixed-income funds invest mainly in bonds and other debt instruments issued by governments, companies and financial institutions. The term "fixed income" may suggest stability, but it does not mean the return is guaranteed or that the value stays constant.

Their main risk is interest rate risk: when market rates rise, the price of many existing bonds tends to fall, with a stronger effect on longer-duration instruments. Credit risk also applies, since if an issuer's solvency worsens, the value of its bonds can drop. Anyone comparing this level with direct corporate financing can review the differences between fixed income and private debt.

Level 5. Private debt and crowdlending

Private debt consists of financing granted to companies or other borrowers outside the traditional public bond markets. Crowdlending allows several investors to take part in loans through platforms that connect financing with borrowers, in exchange for interest and the return of capital according to the agreed terms.

This category can offer an attractive nominal return compared to more conservative alternatives, but the higher interest usually reflects, at least in part, additional risks that should be assessed one by one. To understand the full set of risks in the sector, it is useful to review a complete framework for crowdlending risks.

Main risks to consider

• Borrower default: the company may stop paying interest or fail to return the capital.
• Uncertain recovery: even where guarantees exist, enforcing them can be complex and may not always recover the full investment.
• Limited liquidity: the capital may remain committed until maturity, and an early sale may not be available.
• Concentration: investing in few companies or a single sector increases dependence on specific risks.
• Platform risk: it is worth understanding which entity provides the service and what happens if it stops operating.

On platforms such as Maclear, headquartered in Switzerland, the minimum amount to take part in a project is usually 50 euros, which allows even a modest capital to be spread across several loans and to diversify a private-debt portfolio. This reduces, but does not eliminate, concentration risk.

To address limited liquidity, Maclear offers a Secondary Market where the investor can try to sell their position before maturity; the platform charges the seller a 2.5% fee, and the sale is only completed if a buyer is interested, so liquidity is not guaranteed.

To address default risk, Maclear maintains a Provision Fund, built from 2% of the financed projects, which can cushion certain losses. It is not insurance and does not guarantee the return of capital or interest, and it should not be confused with a buyback guarantee, a different mechanism that Maclear does not offer. Crowdlending is not comparable to a deposit covered by the Deposit Guarantee Fund: the capital is not protected and can be partially or totally lost.

What is Maclear's Provision Fund and what does it cover?

It is a common fund built from 2% of the projects financed on the platform, designed to mitigate the impact of possible defaults. It does not cover 100% of losses, it is not an insurance policy, and it is not equivalent to a buyback guarantee: the investor remains exposed to the credit risk of each loan.

Level 6. Equities and equity funds

Shares represent a stake in a company's capital; their price depends on business results, growth expectations and the overall economic situation. Equities can offer higher growth potential over the long term, but they also experience significant fluctuations, and the investor can lose part or all of what was invested in a company.

Equity funds allow diversification across companies, countries or sectors, which reduces certain specific risks without preventing the overall portfolio from falling when markets go through a negative period.

Level 7. Speculative investments and very high-risk assets

At the top end of the scale are speculative strategies, certain highly volatile assets and leveraged products, which amplify market movements. Their prices can generate significant gains, but also very large losses; with leveraged products, depending on the instrument, the loss can even exceed the initial investment.

These investments require specific knowledge and a rigorous risk assessment; they should not be used for an emergency fund or to commit money needed for essential expenses.

How to check a product's real risk before investing

Every financial product publishes documentation that describes its risk level in a standardised way. Reviewing those documents before investing, and not only the advertised return, is the most reliable way to compare alternatives objectively.

For investment funds, the key document is the KID or PRIIPs key information document, which includes a numeric risk indicator, the product's costs and performance scenarios. The fund prospectus adds information on the portfolio's average duration and the credit quality of its assets: a long duration or low credit quality usually implies more risk.

In crowdlending, the equivalent is the specific documentation for each loan: what guarantees back the operation, the agreed term, the borrower's rating and the conditions for repayment or early exit through a secondary market, when one exists. A practical guide on what to check before investing in a P2P loan details the points that should not be overlooked.

What documents should I review before investing in a P2P loan?

At a minimum, the project sheet with the loan amount and term, the guarantees offered by the borrower, the risk rating assigned by the platform, and the repayment conditions, including the possibility of early sale on a secondary market and its cost.

How to choose the right level of risk?

The scale helps rank the alternatives, but it does not determine which product each person should choose: the investment's risk needs to be matched with financial goals and personal circumstances.

Define when you will need the money

Time horizon is one of the most important factors. If the capital will be needed within a few months, taking on a lot of volatility may be unsuitable; for long-term goals, it may be reasonable to consider assets with higher growth potential.

Difference between risk tolerance and risk capacity

Risk tolerance is the psychological willingness to accept fluctuations. Risk capacity depends on the real financial situation: income, debts, job stability and net worth. The portfolio should reflect real capacity, not only preferences.

Keep a liquidity reserve and compare after costs

Before investing, it helps to have an emergency fund in liquid, low-risk alternatives. Additionally, fees, taxes and inflation can significantly reduce what the investor ultimately receives, so it is worth comparing products on consistent terms.

Is there an investment that is both safe and profitable?

Alternatives offering higher potential returns require the investor to accept some additional risk, although this does not guarantee earning more money: an investment with high potential returns can end up generating losses. Conservative options serve an important purpose even if their returns are modest: preserving liquidity and keeping capital available are also valid goals.

Comparing products should take into account, at a minimum, the probability and magnitude of possible losses, the expected return after costs and taxes, the holding period and how easy it is to recover the capital.

Conclusion: safety is measured, not assumed

Understanding the investment risk scale helps compare alternatives and avoid decisions based solely on the advertised interest rate. Accounts and deposits covered by the applicable guarantee scheme tend to offer greater predictability, while funds, private debt, equities and speculative strategies carry different risks and, in some cases, a higher chance of losses.

Crowdlending occupies a position that requires particular attention: it can offer attractive interest, but default risk and limited liquidity clearly set it apart from guaranteed bank products. Each loan should be analyzed individually, reviewing its guarantees and exit conditions, and avoiding investing money that may be needed in the short term.

Key takeaways

• No investment is risk-free: there are at least six types of risk (capital loss, credit, market, liquidity, inflation, concentration) that should be assessed separately.
• In Spain, the FGD covers bank deposits up to 100,000 euros per holder and institution; crowdlending has no equivalent coverage.
• The indicative risk scale runs from level 1 (guaranteed deposits) to level 7 (speculative and leveraged investments), with crowdlending at level 5.
• At Maclear, the minimum investment per project is 50 euros, which makes it easier to diversify across several loans even with limited capital.
• Maclear's Secondary Market allows an early exit attempt with a 2.5% fee charged to the seller, but liquidity is not guaranteed.
• Maclear's Provision Fund, built from 2% of financed projects, mitigates part of the default risk, but it is not insurance or a buyback guarantee.

Frequently asked questions

Is there a 100% safe investment?

No. Even bank deposits covered by the deposit guarantee scheme are exposed to inflation risk and coverage limits. Safety is always relative to a specific type of risk, never absolute.

Which investments carry the least risk?

Interest-bearing accounts and bank deposits covered by the applicable guarantee scheme, followed by Treasury bills held to maturity, tend to rank among the lowest-risk alternatives on the indicative seven-level scale.

Is crowdlending a safe investment?

Not in the sense of guaranteed capital: it sits at a moderate-to-high level on the scale, with default risk and limited liquidity. Mechanisms such as the Provision Fund or the Secondary Market can mitigate part of that risk, but they do not eliminate it or replace the coverage of a bank deposit.

What is the difference between risk and volatility?

Volatility is the magnitude of short-term price fluctuations. Risk is a broader concept that also includes the possibility of default, lack of liquidity or permanent loss of capital, even without large visible price swings.

Where can I invest without losing money?

There is no option that completely eliminates the possibility of loss. Alternatives with a lower probability of nominal capital loss, such as deposits covered by the FGD, remain exposed to the risk of inflation eroding the purchasing power of the invested money.

The content of this article is provided for informational and educational purposes only. It does not constitute investment, financial, tax or legal advice. Peer-to-peer (P2P) lending and crowdlending investments carry a risk of partial or total loss of capital. Past performance does not predict future results. Liquidity on a secondary market is not guaranteed. Readers are invited to carry out their own research and to consult qualified advisors before making any financial decision. The availability of products and services may be restricted in certain jurisdictions.