The baby will not miss what it doesn't know it's got so I'd go higher risk and besides the investment has plenty of time to grow in spite of fluctuations. If you observe your baby over the next year or so you'll probably realise that actually it has a fairly nonchalant attitude to risk until you start programming it with instructions not to do this or that because it is dangerous! Otherwise children would probably never launch out across a room to walk!

I presume you have the government's free money and a child trust fund will be one way of avoiding tax issues too. A saving account is not necessarily "safe" as it may grow by less than inflation and the bank/building society may reduce the rate so that you keep having to invest time & effort in moving the money, which will soon eat away the little gains you have made - imagine if instead if you use the time to do more work and pay that money into an account!

Check out the recent Moneywise article on investing for children.

I think finding a suitable child trust fund to invest the governments initial £250 in and then contributing on a regular basis would be a good start.  I agree with earlier comments, its a little to early to be considering risk profiles for someone so young!  There is plenty of time in the next 18 years to ride out any crashes and still turn in a decent return.