When helping you to plan funds or other investments, a good financial adviser will first go through the process of identifying your investment risk profile.
This will define the maximum risk level you would like to see reflected in the investments you will make.
This can be done in a face to face conversation, but also online using the Principle First Investment Risk Profiler Tool here on our website. By answering a short sequence of simple questions on your attitude to risk, the investment risk profiler will quickly inform you of your risk level, which in turn will enable your adviser to recommend investments in one of a range of funds, investment products, or in one of our ready-made Principle First Investment Portfolios.
The Investment Risk Profiler tool classifies investors in one of six risk profile categories.
Investors with a ’very defensive’ to ‘defensive’ risk profile feel comfortable with only a very low level of risk in their investments. They want their money placed where it is safe and secure. They may be most comfortable with the traditional bank deposit account, cash Individual Savings Accounts (ISAs), or guaranteed investments that assure you there is zero risk to your capital, and that you will be repaid at least the sum invested.
Investors with a ‘cautious’ risk profile are not quite as averse to risk as the defensive investor, but would certainly not feel comfortable with investments that are subject to large fluctuations in the shorter term.
The investor with a ‘balanced’ risk profile may be prepared to accept a mix of low-risk and medium-risk investments. If you have a balanced risk profile you may opt for a stocks and shares investment through a stocks and shares ISA, to target a relatively good return in the longer term. The investor with a balanced risk profile is likely to agree, in consultation with his financial adviser, to accept that the value of his investments may fall as well as rise.
Investors with a risk profile ‘aggressive’ to ‘very aggressive’ view a higher risk level as a positive element in their strategy to achieve a potentially higher return. These are investors who will not be nervous to see fluctuations of 25% or more in their investments in any given year, and in fact may view a drop in stock values as an opportunity rather than a threat – an opportunity, that is, to snap up additional investments at a bargain price.
Are you curious to know your risk profile? Test your attitude to risk right now with our Investment Risk Profiler Tool, or call us to discuss further on freephone 0800 678 5929
