what is risk?
We all understand what “risk” means we have been programmed from an early age to spot the signs. We all make mistakes but it’s how we learn from them that helps us to move forward ensuring we don’t make the same mistakes again and again!
You are probably asking yourself what does this have to do with Investing? Well investing and, where to invest is all about understanding how much risk you are prepared to take.
Everyone is different and this means that one size does not fit all, and why should it, we are all individuals and we all have different goals and objectives that we want to achieve, be that for ourselves or our families.
Some people may wish to take greater risk than others in the hope of better returns than say someone, who does not wish to take any risk with their finances. knowing and understanding risk in relation to investing your money allows you to make that decision from an informed position.
There are four main asset classes that people invest in none of which are risk-free and they are: –
From these four main asset classes investment portfolios are constructed by experienced investment managers. The mix and percentage weighting of portfolios mean that one portfolio can carry a greater risk than another. For example, a portfolio with a greater weighting towards cash and bonds is likely to carry less risk than a portfolio that has a greater weighting to property and shares. It is likely that this portfolio will make a greater return over the long term as it is often the case that the more risk you are prepared to accept the greater the potential returns.
There are also other risks that must be considered when thinking about investments and these are: –
Market Risk – Entire Stock Market starts to fall
Inflation Risk – Purchasing power is reduced as inflation increases
Specific Risk – Investment in one individual company
Currency Risk – Overseas investments would fall in real terms as sterling becomes stronger
Liquidity Risk – An investment might be hard sell e.g. commercial property
Timeframe – How long do you wish to invest?
As Financial Advisers we can help you understand the risks involved with investing by explaining how to address these areas and designing a Financial Plan with you, that helps you to achieve your financial objectives and goals but within a risk tolerance you are comfortable with.
If you would like to speak with us about this or any other matter, please feel free to contact us directly
REGULATORY STATUS OF THE SERVICES/ ADVICE
Inchmead Financial Services Limited is a joint venture with Beaufort Financial (Wokingham) Ltd. Beaufort Financial is a trading name of Beaufort Financial (Wokingham) Ltd, an appointed representative of Beaufort Financial Planning Limited which is authorised and regulated by the Financial Conduct Authority. Beaufort Financial (Wokingham) Ltd is registered in England & Wales. Company No. 12495066.