Investment Risk
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Understanding risk and reward.
We all interpret risk in different ways.
An understanding of what risk means is influenced by your past experiences and what you are willing to accept in the future. Financial risk, in the context of your investments, is the risk of losing money. However, in order to grow your investments, you need to take on some element of financial risk.
It is generally accepted that the more financial risk you are willing to take, the greater the potential financial reward.
The downside is that losses suffered could be greater. Where the danger comes is if the risk is not properly understood, managed or controlled and your money is exposed to financial risks with which you are comfortable.
It is generally accepted that the more financial risk you are willing to take, the greater the potential financial reward.
The downside is that losses suffered could be greater. Where the danger comes is if the risk is not properly understood, managed or controlled and your money is exposed to financial risks with which you are comfortable.
Understanding your tolerance to risk.
Before investing, Maplewood Financial Solutions will assess how much financial risk you are willing to take. As part of this assessment, we will also attempt to assess your capacity for loss. There will be times when certain assets will tend to go up in value at the same time as others fall, meaning you could benefit from a more balanced approach that cushions the impact of an unexpected market downturn. Investing in assets that behave differently is essential in order to effectively spread risk
The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.
The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.
Step 1.
Complete the psychometric risk profiling questionnaire. The questionnaire was developed with industry-leading psychometric consultancy, Oxford Risk, a company led by academics from the University of Oxford.
Step 2.
Defaqto then automatically checks the consistency of the responses and identifies answers outside the expected range, which we can discuss together.
Step 3.
You then complete a few additional questions relating to your investment timeframe, capacity to tolerate possible losses and liquidity requirements
Step 4.
The selected risk profile gives a score out of 10, a plain English explanation of how comfortable you would be with the possibility of losing investments and investing in higher-risk investments to get better returns, a likely portfolio asset allocation and an indication of the expected range of returns over 12 months
Defaqto
At Maplewood Financial Solutions we use Defaqto’s risk profile planning tools to help us determine your risk level.
The process helps to build a deeper insight into your requirements and checks the extent of your understanding. As a result of the answers given and the conversations they trigger, both your adviser, Russell, and you should be confident that the final outcome is an accurate and fair reflection of your risk tolerance and capacity to tolerate possible losses
The process helps to build a deeper insight into your requirements and checks the extent of your understanding. As a result of the answers given and the conversations they trigger, both your adviser, Russell, and you should be confident that the final outcome is an accurate and fair reflection of your risk tolerance and capacity to tolerate possible losses
Maplewood Financial Solutions Risk Profiles
LOW
An investor who is a Risk Profile 3 is likely to be concerned about the possibility of losing money on their investments, but does not want to completely ignore the possibility of making higher returns than are offered by bank accounts and low-risk investments. As a result, these investors are willing to sustain very small losses on the amount invested by investing in lower- and medium-risk investments such as cash, bonds and property in order to achieve a higher return.
LOWEST MEDIUM
An investor who is a Risk Profile 4 would probably be concerned about the possibility of losing money on their investments, but may also want to achieve higher returns than are offered by bank accounts and low-risk investments. As a result, these investors are willing to accept only small losses by investing in some medium-risk assets such as property and possibly some shares, in order to achieve a higher return.
LOW MEDIUM
An investor who is a Risk Profile 5 is prepared to accept small losses, particularly in the short term, to gain higher returns than simply investing in low-risk investments. An appropriate investment portfolio would consist of a balanced mix of lower and medium-risk investments such as bonds and property as well as some higher-risk investments such as equities.
HIGH MEDIUM
An investor who is a Risk Profile 6 is prepared to accept some losses, particularly in the short term, to achieve higher returns than by simply investing in low-risk investments. An investment portfolio within this profile would consist mainly of higher-risk investments such as shares with some lower and medium-risk investments.
HIGHEST MEDIUM
An investor who is a Risk Profile 7 would want to make higher returns on their investments, although they are still concerned about medium sized losses on their investment portfolio. An appropriate portfolio for this profile would primarily contain equities with a few lower and medium-risk investments such as bonds and property.
HIGH
An investor who is a Risk Profile 8 has a ‘high’ attitude to accepting risk and concentrates on getting higher returns on their investments. An investment portfolio suited for this profile would consist in a high proportion of higher-risk investments such as equities, with the occasional lower- and medium- risk investments
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Maplewood Training Solutions Ltd T/A Maplewood Financial Solutions. Registered office address: 16 Maplewood Gardens, Lancaster, Lancs, LA1 4PE. Registered in England. No: 08513940.
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