Characteristics of a Low-Risk Stock Portfolio

A company can change so that its stock no longer exhbiits low-risk characteristics.

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Low-risk stock portfolios can differ from one another in precise composition, but they are likely to exhibit some similar characteristics. Those features separate lower-risk equity securities from riskier stocks. These qualities are meant to protect an investment portfolio from the brunt of market downturns, and in times of market uncertainty they can mean the difference between returns and losses. However, not all of the features of low-risk stocks are ideal, and a low-risk portfolio can disappoint investors searching for short-term profits.


One of likely characteristic of a low-risk stock portfolio is income. Dividend stocks provide this feature, and they're often considered an alternative to the more conservative fixed-income asset class. Even when the stock market as a whole declines, dividend stocks can offer investors returns because they continue to provide income, according to a 2012 article in "The Wall Street Journal." Dividend-paying companies tend to be flush with cash, and they sometimes increase their payouts despite market conditions, according to a 2012 "Kiplinger" article.

Low Volatility

Low volatility is a characteristic of a low-risk stock portfolio. Although it's not possible to escape volatility altogether in an equity portfolio, investors can choose types of stocks that demonstrate less extreme price swings than the rest of the markets. Low-risk stocks include those in the power and consumer-goods sectors. From a long-term vantage point, such as the four-decade period beginning in 1968, less-volatile equities delivered greater profits than higher-volatility stocks, according to a 2012 Market Watch article.


Capital preservation is another feature of a low-risk stock portfolio. This characteristic can keep an original investment intact throughout market downturns. But it can also prevent investors from getting a share of some of the quickest and highest profits associated with faster-growing companies. Worse, if conditions become bad enough, low-risk stocks that used to earn profits might become unable to deliver on the very characteristics that made them attractive, such as paying dividends, according to a 2012 "Kiplinger" article.

Large Cap

A low-risk stock portfolio might include some of the stock market's largest companies. Large-cap stocks, which have a market capitalization upwards of $5 billion, don't always produce profits as quickly as their smaller, riskier counterparts. Nonetheless, large-cap stocks have a proven history of increasing their revenues and income, which creates strong balance sheets and helps their investors if the economy falters. Industry-leading companies also have seasoned management teams that have weathered changing market conditions around the world. Their knowledge can help a business get through an economic slowdown.