When investing, it is important to ensure that where you invest is suited to your individual needs. This includes, taking into consideration your family situation, need for income versus growth, tax situation, investment time horizon and the amount of risk you are willing to take (this is referred to as your risk tolerance). The best way to determine your risk tolerance is through a risk profile. This also then needs to be balanced by the amount of risk you can afford to take (this is your risk capacity).
What is a risk profile?
It is a measure of how comfortable you are with investments and your personal tolerance to investment risk. In simple terms, how much risk you are willing to take.
Your risk profile is influenced by how much you are investing, the time frame to achieve your investment goals and objectives, how cautious a person you are, what you know about investments and your previous investment experience, and your ability to absorb losses. It is therefore not always the same and can change over time depending on your circumstances.
All investments are subjected to risk. This means that as well as making money, you can also lose money, or the returns may not be sufficient to meet your objectives. As a rule, the higher the potential return the higher the investment risk, and the longer the investment time frame that maybe required to reduce this risk. Similarly, a lower risk investment would normally have a lower return and a shorter investment time frame.
If the product risk is matched to your risk profile, the end result should be an investment portfolio that suits your needs and with which you are comfortable.
Your adviser has an obligation to ensure that before providing you with any financial advice they assist you to understand your financial goals, what you are trying to achieve, what time frames you are looking to invest for and what your attitude to risk is. We would therefore appreciate that when requested you take a few minutes to complete the attached risk questionnaire which will assist in selecting an investment portfolio appropriate to your needs.