Attitude to Risk

Your attitude to risk is one of the most important elements in assessing your financial strategy and will shape the types of investment we recommend.

We look at your attitude to risk, the reward you would like to see and the volatility you are prepared to accept over a mid to long term investment horizon (5+ years).

Finding the correct balance between the elements of risk, reward and volatility is an integral part of finding investments that suit you.

By using a specially developed profile questionnaire we are able to objectively establish your attitude to risk. Once this has been established, we use a sophisticated scoring model to determine an asset allocation suitable for your own personal attitude to risk.

We find that many of our clients already have a preconceived idea of their attitude to risk, but we believe discussing, and if necessary, challenging these preconceptions enables us to better establish an accurate basis for our investment advice.

General risk profiles:

Cash

You have no tolerance to investment risk, you should consider paying off any debts that you may have and then building up a reserve in a high interest deposit account or national savings.

Defensive

You have a low tolerance to investment risk. This implies that you would accept a small amount of investment risk to achieve the growth that you require, but only if this can be achieved with a low degree of price volatility. Whilst your tolerance to risk is low, you recognise that diversification is important and therefore, you accept a limited amount of equity exposure. Although the volatility of your asset mix may be less than that of the Moderate Portfolio, you accept that by taking a conservative approach, inflation may reduce the purchasing power of your savings. You should note that these funds are subject to market movements.

Cautious

You accept that investment risk is inevitable if you are to achieve reasonably attractive real returns. Funds in this category usually offer reasonable growth potential in the medium term and can produce an income. Similarly, their currency risk is reduced through limiting the exposure to overseas assets, however you should note that these funds are still subject to market movements.

Moderate

You accept that an increased investment risk is inevitable if you are to achieve attractive real returns. Investments in this category usually offer reasonable growth potential in the medium term. Although risk is reduced through diversification across markets, the Fund Manager can use this wide choice of assets to adjust exposures according to specific market conditions. You should note that these funds are subject to market movements and currency risk.

Adventurous

You have a willingness to accept high investment risk. This enables you to include wide range of equity assets with good long-term growth prospects. Although asset class diversification will usually be compromised in an effort to achieve higher real returns, the Fund Manager can use both UK and overseas equities to react to specific market conditions. You should note that these funds are subject to market movements and currency risk.

Speculative

You have a very high tolerance to investment risk. This will allow you to access to a wide range of funds, which will target specific assets with potential for high growth. These funds can offer a high level of real return in the longer term. As they focus on asset types or specific markets that undergo a high degree of price change, they can, and often do, experience greater than average volatility. Diversification will usually be compromised in an effort to achieve higher real returns and there will be a significant chance that the value of your assets may fall and could take several years to recover their original value. It is likely that you are looking to invest over the long-term. You should note that these funds are subject to market movements and currency risk.

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