Your attitude to risk
Imagine you invested £10,000 six months ago. There is some unexpected news, and the stock market falls rapidly. The value of your fund goes down 30% - to £7,000. How do you feel?
- Are you worried? After all, over £3,000 has just been wiped off the value of your fund in a few days.
- Are you relaxed? Taking a long view, there’s plenty of opportunity to get back this value – and to increase it even more.
How you would react is a very personal matter – both points of view are equally valid. Even if you have a secure income, seeing the value of an investment fall dramatically could give you some sleepless nights. But equally, if you have a secure income, no debts and some money on deposit for peace of mind, you’re more than able to ride out some of the troughs so you can benefit from the recovery and longer term uptrend.
This is a very basic way of looking at your attitude to risk, and we have more sophisticated ways of working out what’s known as your risk tolerance. These tests involve more detailed questions and help you get a better understanding of what kind of investments might be best for you. Contact us for more details of this service or go to our portfolio builder, where we test your risk tolerance as part of that process - and it only takes 20 seconds.
What next?
Whether you contact us about a formal risk tolerance test or feel you already know how you feel about investment risk, you should make sure you understand investment risk. You’ll also need to read about how investment risk relates to funds; if in doubt about risk issues be sure to contact us.
Once you are comfortable about risk, you can begin to explore the portfolio tools, or, if you have a specific sector in mind, visit our fund analysis tools.