Investment Risk
When investing funds in any format, you need to understand the investment approach and risk involved. Example risk categories when investing capital or income are as follows:
Risk Scale Guide 1 - 2 |
You are likely to wish to invest in cash assets and are not willing to accept risk to your investment in the short term. You understand that the potential for growth is limited and that inflation will effect your overall return. |
Risk Scale Guide 3 - 4
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You are are willing to accept some risk to your investment in the short term for improved returns in the longer term. You understand that the potential for growth is improved, but this may mean that the value of your investments may fall as well as rise. You would be uncomfortable with significant volatility in your investments. Therefore, you may consider investments such as Cash, Fixed Interest Securities and Commercial property funds. |
Risk Scale Guide 5 - 6 |
You are are willing to accept a balance between investment risk and reward with the objective of improved returns in the longer term. You understand that the potential for growth is improved, but this may mean that the value of your investments may fall as well as rise and that you may get back less than you invested. You understand that this will involve volatility in your investment values. Therefore, you may consider investments such as Equities/Shares,Cash, Fixed Interest Securities and Commercial property funds. It may also involve investment in overseas markets as well as UK markets. This increases risk because of currency fluctuations as well as investment risk. Risk can be reduced by diversifying your investments across sectors and markets. |
Risk Scale Guide 7 - 8 |
You are are willing to accept a higher level of investment risk and reward with the objective of improved returns in the longer term. You understand that the potential for growth is improved, but this may mean that the value of your investments may fall as well as rise and that you may get back less than you invested. You understand that this will involve the potential for significant volatility in your investment values. Therefore, you may consider investments mainly in Equities/Shares and is likely to involve investment in various overseas markets as well as UK markets. This increases risk because of currency fluctuations as well as investment risk. Risk can be reduced by diversifying your investments across sectors and markets. |
Risk Scale Guide 9 - 10 |
You are are willing to accept the highest level of investment risk and accept sharp fluctuations in your investment values on a day-to-day basis. You could get back less than you invest. |
For guidance and information purposes only. Please seek Independent financial advice before proceeding with any changes/new contracts. The Financial Services Authority does not regulate taxation advice.
