Monthly risk explained
Monthly risk is a measure of the maximum typical fall in value that a fund might experience.
The “monthly risk” figure for a typical UK stock market fund is currently about 7.9%. This roughly means that in 19 months out of 20 you should not, on average, expect a fall in the capital value of more than 7.9% in any one month. In one month out of 20 the loss might be more severe (October 1987 being an extreme example, with a 20%+ fall in one month)..
What does this mean for you?
If you wish to invest in a typical UK stock market fund, we can say that you should expect falls in the value up to 7.9% in one month - remember this is only a loss if you sell.
How is it calculated?
Monthly risk is calculated using an analysis of each of the last 36 months performance. Statistical analysis does have limitations, however – it’s a simple model of a complex reality.
While statistical analysis has great value, you shouldn’t use statistics alone to make your decisions. Statistical analysis can only use past data, and past performance isn’t necessarily an indicator of future performance.
If you’re building your own portfolio you should use the monthly risk figure – in relation to your personal attitude to risk – to identify likely funds. We’ve done some of the work for you with our lists of UK and overseas funds worth considering. You can then buy these (and other) funds online.
If you’d rather, we can provide bespoke input, recommending a portfolio and individual funds just for you. We understand that many investors are too busy to carry out the in-depth research needed. Contact us for more information on tailored advice.