Every day we take certain risks without even realising it, from crossing the road to driving our cars. Other risks are more considered, for example deciding to do a skydive or bungee jump. When it comes to investing, risk has a different meaning. The risk associated with investing could be better defined as your willingness to accept losses as well as gains. Some investors like to take more risk with a view to achieving a better return.
At DW Financial, while helping you plan for your investment, we will assess your risk profile by completing a fact find and a risk profile questionnaire. From the results of this questionnaire we will be able to see what your attitude to risk is.
There are two different risk categories to be considered.
1 – The first is how you assess risk
Low – A low risk investor wants to avoid large fluctuations in their investment value, they accept limited risk and accept that this will produce modest returns.
Medium – A medium risk investor is willing to accept significant fluctuations in their investment value especially over a short term. They accept risk in return for the potential of good returns over a longer term.
High – A high risk investor is willing to accept sharp or sudden changes in values. They accept risk at much higher levels with a view to achieving high returns.
2 – The second risk is how funds are classified.
This is done from assigning a rating of 1-7 from the ESMA (European Securities and Markets Authority) scale to a fund. A rating of 1 being the safest fund and a rating of 7 being the riskiest type of fund.
DW Financial will recommend some funds that match your risk profile. You can then choose some of these funds or another fund that you would like to invest in.