Your attitude to risk: Risk Averse Investor
Having reviewed the answers to the risk profile statements, the risk category has been calculated and the results suggest you are a Risk Averse Investor.
Potential Returns – Risk Averse Investor
There are no guarantees with this investment strategy and actual results achieved may be higher or lower than those shown. However, these probable returns are a sensible way of understanding the potential downsides as well as the upsides when saving or investing this way.
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, nor does it take into consideration the impact of inflation 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 £127,544 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 £108,006 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 £93,907. This is what you might get back from your original investment if market conditions are poor.
Strategic asset allocation – Risk Averse Investor
Risk averse investors typically have very limited knowledge of financial matters. They are unlikely to have experience of investment. Risk averse investors prefer knowing that their capital is safe rather than seeking high returns. They are not comfortable with the thought of investing in the stockmarket and want to keep their money in the bank.
Risk averse investors can take a long time to make up their mindon financial matters and will usually suffer from severe regret if their decisions turn out badly. They typically hold all of their money in cash deposits.
Risk averse investors need to be aware that their unwillingness to take any risk with their money may mean that the value of their savings does not keep pace with rises in the cost of living (“inflation”).
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.
