Risk Appetite

Investor Risk Appetite

You will know that all investing involves some sort of risk.

 

Use these risk profile descriptions to see which category you fit into, before you start investing yourself.

Investor Low Risk Appetite

Generally speaking, low risk appetite investors need to know that their capital or cash is safe and secure. They would not be comfortable or confident investing in stocks and shares, bonds or property funds. They would much prefer the safety of a bank account for their cash.

Low risk investors are also likely to have limited if any knowledge of the investment world beyond the standard bank accounts they use. They would also feel uncomfortable and regret their decisions if any of them didn’t go to plan. Low risk investors usually have the majority of their cash in bank savings accounts, even if they have longer term horizons of 5- 10 years or more. They do not like any type of high-risk investments.

Low risk investors should be aware that their caution and lack of risk taking will mean that their investments will not beat inflation, and it will be difficult to amass a large next egg.

Investor Low-mid Risk Appetite

Low-mid risk appetite investors again prefer minimal to no investment risk as a norm but can occasionally be tempted to expand these ideas to a very limited extent. As above, they would like to keep their cash in a savings bank, but they do have the knowledge that other riskier investments may provide a better longer term return.

Low-mid risk investors will also have a little more experience of the basic investment world but will be much more used to and familiar with standard bank accounts. As above, Low-mid risk investors will not be comfortable with poor investments decisions that lose money. These investors with longer term time horizons are likely to hold a portfolio of cash and some bonds, but they may also hold a few equity type investments.

Investor Mid Risk Appetite

Typically, mid risk appetite investors do appreciate that they must take some investment risk in order to achieve their medium to long-term targets. They are happier to take some risk with some of their spare money and are likely to have some experience of investments such as shares and bonds. This group can generally make up their own minds on money matters but are still uncomfortable with investment losses. Medium to long term investors in this group typically have balanced portfolios of cash, bonds, and some lower risk equities.

Investor Mid-high Risk Appetite

Mid-high risk appetite investors are willing and able to accept investment risk and appreciate the long-term nature of investing. They are also able to take risks with much of their money. These investors are typically quite experienced investors and are able to use a selection of investment products. Mid-high-risk investors can make up their own minds on investments quickly. They can accept that on some occasions poor results can occur, but that’s part of the long-term investing game.  Long term mid-high risk appetite investors will have portfolios with a large share holdings, and some exposure to corporate bonds and cash.

Investor High Risk Appetite

Generally high risk investors will seek the highest returns possible on their assets and are able to take large amounts of risk to secure such returns. The can take risks with all of their money, and usually have considerable assets available to do so. High risk investors will have vast amounts of investment expertise and will usually have been managing their own investments for some time. Such investors have robust views on investment strategy and will make up their minds quickly. They accept the risks involved with investing, including losing from time to time, and do not suffer from regret when things do go wrong. Most high risk investors will have all their portfolios in stocks and shares, with very little cash.

Find out your own Risk Appetite profile using this risk questionnaire from Charles Schwab.