What is risk

Risk Appetite

If you have seen a Financial Planner or a Wealth Manager, you will have probably been asked about your risk appetite. With us, it is no different.

 

Capacity For Loss 

Like most companies in this industry, we ask clients to complete a risk assessment, aiming to get the right portfolio mix for you and your risk appetite and capacity for loss. We understand no-one ever wants to lose money, but as with any investment, we recognise that you often have to potentially lose in the short term to gain in the long term  – it’s a balancing act. For this reason, capacity for loss is incredibly important. It’s key that you establish the maximum you can afford to lose, or at least the amount you are prepared to see your money value drop.

What is Risk?

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.

 If you would like to be contacted, please leave your details by completing the form below, or if your need is more urgent, please don’t hesitate to contact James King by emailing james.king@kingfp.co.uk , or call him on 01279 598710 and if he is not available, leave a message and he will call you back as soon as he becomes available.

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We would love to answer any questions and/or schedule a complimentary consultation. Please call us or send us an email by completing the form below.

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01279 598710

Causeway House

1 Dane Street
Bishop’s Stortford
Herts
CM23 3BT

King Financial Planning LLP is an appointed representative of The Tavistock Partnership Limited which is authorised and regulated by the Financial Conduct Authority. FCA No: 519014. Registered Office:  1 Queen’s Square, Ascot Business Park, Lyndhurst Road, Ascot, Berkshire SL5 9FE. Registered in England No. OC429875. Partners James King & Tavistock Investments Plc. The Tavistock Partnership Limited is a wholly owned subsidiary of Tavistock Investments Plc.

Some forms of Estate Planning are not regulated by the Financial Conduct Authority.

KingFP