Scottsdale IFA LLP

Types of risk

There are thousands of investment variations. Choosing what's right for you, how you think and feel about risk, is influenced by your individual knowledge and experience.

What is your initial attitude to risk?

Before taking out a product, you need to decide how much risk you are prepared to take. Answering this honestly is quite a challenge. Some key questions we would ask are:

• How much do you value security?
• Are you looking for income or growth?
• Are you looking for short-term or long-term growth?

It's usual to have varying attitudes to your money, which are refined as your financial commitments shift through life. Right now, you may need a safe haven for your emergency fund; with your pension, perhaps you have time to recoup any losses, so can afford to take some longer-term risks; and with your rainy day cushion, taking higher risks in the hope of a happy and faster gain may appeal.

Seeking financial advice can help you to strike a balance, highlight the risks against rewards and ensure you feel comfortable with the potential outcome.

What is your attitude to continuing risk?

As with any goal, you need to continuously review investment performance and revisit your strategy. It's important to be clear on how you would you react in certain situations.

For instance, you've invested in a high-risk fund, and the price falls. Now worth two-thirds of your initial investment, what do you do? Stay put in the hope it will rise back to, or above the previous value, or cut your losses and start afresh? Professional advice at the early stage can help you gauge your risk and security threshold as your life evolves.

How we can help

Facing risk when you are thinking about how much you can gain is easy. But naturally, risk is accompanied by a number of unknowns. Seeking professional advice is important for identifying how you'd feel if your investment venture lost the same amount. With our support, you can understand the context of all your investment decisions and what you are committing yourself to.

Risk and Reward