Your attitude to risk: Adventurous investor
Having reviewed the answers to the risk profile statements, the risk category has been calculated and the results suggest you are an Adventurous Investor.
Potential Returns – Adventurous Investor
When investing, you must accept there will be times when the value of your portfolio will fall. There will be good years and bad years. The important thing is to understand the potential volatility of this investment strategy, what a bad year might look like and be able to cope with it.
As an example only, were you to invest in the illustrative asset allocation then the downside risk in a single bad year is estimated as a loss of 25% or worse of your investment before charges (equivalent to a £25,000 loss or worse on £100,000). The likelihood of this happening is estimated as having odds of 1 in 20 each year. A bad year could occur at any time, including the first year of the investment.
But remember, there are no guarantees. Also, it is important to be aware that your actual investments will be different – Fund Managers will not hold the same investments as the illustrative asset allocation, and so will give rise to different outcomes for potential loss/volatility and potential returns.
There are no guarantees with this investment strategy and actual results achieved may be higher or lower than those shown. As the investment strategies increase in risk and potential reward, so does the amount you may lose in a bad year. Conversely the investment gain in a good year also increases. However, we believe these probable returns are a sensible way of understanding the potential downsides as well as the upsides when saving or investing this way.
You should always discuss appropriate investments with your financial adviser. Your decision to make any investments should have regard to the way your money is to be managed, the impact of inflation and the length of time you wish to invest.
A stochastic model (supplied by Moody’s Analytics) has been used to generate thousands of possible future scenarios for this Strategic Asset Allocation. Stochastic modelling is a standard industry tool, and allows us to estimate the measures of risk and return shown in the Potential Returns section.
Potential gain
The graph below is an example of the potential returns based on an assumeD £100,000 invested for a term of 10 years following the illustrative asset allocation, assuming no charges, no active management and with regular rebalancing.
The chart has been simplified, in that it does not show potential daily market fluctuations, or account for your specific financial objectives, but is an illustration of the variability in long term returns before charges that might be experienced with the illustrative asset allocation:
Potential Growth
Average Growth
Lower Growth
The top line shows there is a 1 in 10 probability of achieving at least £316,919 after 10 years. This is what you might get back from your original investment if market conditions are very good.
The middle line shows there is a 1 in 2 probability of achieving at least £163,454 after 10 years. This is what you might get back from your original investment under average market conditions.
The bottom line shows there is a 1 in 20 probability of achieving less than £87,488. This is what you might get back from your original investment if market conditions are poor.
Strategic Asset Allocation – Adventurous Investor
Adventurous investors typically have high levels of financial knowledge. They often have substantial amounts of investment experience and may have been active in managing their investment arrangements.
In general, Adventurous investors are looking for a high return on their capital and are willing to take considerable amounts of risk to achieve this. They are usually willing to take risk with all of their available assets. Adventurous investors typically will make up their minds onfinancial matters quickly. They do not suffer from regret to any great extent and can accept occasional poor returns without much difficulty. Risk attitude is only one factor in determining a suitable investment strategy. You must also consider your ability to withstand short term losses, and your need to take risk to achieve your financial goals.
You should always discuss appropriate investments with your financial adviser. Your decision to make any investments should have regard to the way your money is to be managed, the impact of inflation and the length of time you wish to invest. A stochastic model (supplied by Moody’s Analytics) has
been used to generate thousands of possible future scenarios for this Strategic Asset Allocation. Stochastic modelling is a standard industry tool, and allows us to estimate the measures of risk and return shown in the Potential Returns section.
