Ultimately there is risk with most things we do in life; crossing the road, driving our cars, getting on a plane. There is always a risk something can go wrong. The world of investing is no different. But it’s the attitude to take to this which can make all the difference.

History has taught us that if you stay invested for the long term, you should see some reward, however this will not come without bumps along the way.  It’s important as an investor to ask yourself whether:

• You are prepared to see the valuation on your portfolio potentially fall,
• You have a cut off point of what this value can fall to
• You have an investment target in mind
• The risk you are willing to take to ensure you reach this target.

Falling markets, according to record, eventually recover. If you feel you can ride the wave, then it is a question of staying invested. The chart below shows that over the long term holding investments in the Stockmarket has historically provided investors with the greatest return. However what you will see is the more risk you take the greater the chance of a higher fall in the value of your investment.

The extremes are pretty high with Equities, showing one year returns ranging from gains of 150% to falls of 51%. At the other end of the risk scale, bonds have produced at best, in any one year, a gain of 40% with a maximum loss of 20%. Now past performance is no guarantee of the future, but looking at this data does show how mixing asset classes can reduce risk and still give a good return. What we have to decide together is what that mix should be for you, based on what you want to achieve.

Our job is to establish what risk is right for you based on your goals, your longevity and your potential perseverance with the bumps in the road.