Risk vs reward
Despite the recent mortgage interest rate rise, savers will still struggle to enjoy any kind of growth on money they have on deposit, leading some to consider a riskier investment.
If you’re considering investing in the stock market, an important – and very personal issue – is how you feel about the prospect of putting money at risk and your ability to accommodate any loss in value.
Factors in determining risk
As investment advisers, we will consider a range of factors when assessing your attitude to investment risk:
- Age – How old you are may affect how you would like to invest, particularly the closer you get to retirement.
- The need for emergency cash – You should always keep a certain amount readily accessible (for example, in a deposit account) in the event of an emergency or as a foundation for your longer-term savings and investment.
- Can you afford to take a risk? – If your investments dropped in the short term, do you have the time to wait for them to recover?
- Can you afford not to take a risk? – Leaving all your money on deposit may carry minimal risk, but you may miss out on higher potential returns and possibly see the spending power of that money fall due to inflation.
What’s your appetite for risk?
It’s a fact that risk and the potential for reward go hand in hand: Investments that are low in risk are low in potential reward, whereas the more risk you’re willing to take with your money the greater the potential for reward.
Devising an appropriate investment strategy
Once you’re clear – and comfortable – with the level of risk you need to take to reach your goals, you’ll need an investment strategy that’s finely calibrated to deliver the results you’re looking for.
An important part of this is to avoid the ‘eggs-in- basket’ principle and make sure your portfolio is invested across a range of assets in order that the positive performance of some neutralises the negative performance of others.
You’ll also want to know that your money is in the hands of some of the best and most consistent investment managers in the business and you’ll need to give your investments time – the longer you can leave your investments in place, the more likely you are to cope with any short-term changes in market value.
Talk to us
As members of Openwork, the UK’s largest financial adviser network, we follow a clear and thorough process designed to clarify exactly what you need from your investments. We also have access to a meticulously researched and managed range of investments specifically designed to meet different needs. Taken together, you will know not only that your money is in good hands, but also that given time, there is an increased level of probability that it will perform in line with your expectations.
Good investment advice involves building a clear picture of the results you’re looking for, taking into account your current financial position, your future goals and your personal attitude to investment risk.
Talk to us for expert advice.
The value of investments and any income from them can fall as well as rise. You may not get back the amount originally invested.