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This website contains information which may or may not be applicableto your own situation and circumstances.

Any information or advice on this site does not constitute a personal recommendation. If you have any doubts as to whether a product or service is suitable for you, please seek independent advice.

Risk Advice

There are two different considerations when discussing risk. One is your overall attitude to risk for your estate and then the specific risk that you are prepared to take with the investments you are making. The two are not necessarily the same.

I would like to amply demonstrate this through two extreme examples; the risk you are prepared to take with your home, against that which you are prepared to take with a small percentage of your overall investment, say 2%. If I asked you if you were prepared to invest your home to produce a 20% growth, but the downside is you could lose your home, you are unlikely to be prepared to take the consequence of loss whatever the possible return. This is because it would have such a large impact on you if it were to fail. If, however, I asked if you were prepared to invest 2% of your investment in assets which could produce 20% growth, with the same scenario of possibly losing all of the investment, you MAY be prepared to take the consequence of loss as it may have very little, if any, impact on you.

By spreading and diversifying investments you are reducing the risk of an investment. Whilst it is true to say, any equity holding you hold shows you are prepared to see fluctuations in the value of those investments, that is an over simplification. Classifying equity holdings as high risk once again ignores that holding shares in one company is far riskier than holding shares in 100 different companies.

Finally the length one holds an investment plays an important part in assessing risk. Volatility of an equity means that the longer it can be held the more likely it is to produce a consistent average return. The infamous ‘Day Traders’ of the late 1990’s who changed investments frequently, were taking a far greater risk than someone investing over a period of say 10 or 20 years, often in the same shares. Where are the ‘Day Traders’ now? Risk should be deemed that which is appropriate for your requirements whilst fitting within your overall risk profile.