Attitude to Risk

Our Guide to investing provides a detailed explanation of the issues you should consider when it comes to saving & investing.

The investment strategy we recommend needs to be in line with your attitude to investment risk.  Risk in this context relates to the probability of loss, or less than expected returns, from an investment.

Establishing your attitude to, or appetite for, risk means taking account of several factors such as:

  • The anticipated length of time before you want to use the capital invested – the ‘investment term’
  • Whether you have a need to take income from your investments
  • Access to short term, or ‘emergency’ funds for unexpected circumstances
  • How you think your earnings might grow
  • Whether you have any debts
  • Your overall view on investing
  • The importance of protecting your investment from the effects of inflation
  • The question of ‘liquidity’- how easy will it be to get your hands on your money?

The Investor Risk Profile (IRP) Questionnaire we use provides an initial indication of your personal attitude to risk.

The questionnaire has been developed by Barrie & Hibbert, a professional services firm with expertise in risk, asset allocation and financial planning tools. Answers you provide are aggregated to produce your risk profile “score” in a range from 1 (Risk Averse) to 6 (Adventurous). We will then discuss what that score implies for the design of your investment strategy and whether this reflects your true attitude to risk. This may lead to an adjustment to the “score” we use in subsequent stages of our investment process.

Taking account of your ‘capacity for loss’ – Although you may be willing to make investment decisions that allow for more risk, seeking higher returns, we have a responsibility to assess your capacity for loss. This means assessing whether, if the possible risks of your potential investments were realised and you were to lose money, it would have a detrimental effect on your standard of living. This should be taken into account in establishing the risk you are able to take. After discussion with you, your capacity for loss may affect the risk profile score used when we develop your recommended investment strategy.

Please be aware:

The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.

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