risk in investing

Understanding Your Level of Risk



Posted on: 15th February 2023

In today’s hectic and unpredictable marketplace, the risk in investing is even scarier than ever before, especially when you are not a risk-taker elsewhere. Whilst more risk can result in higher rewards in the investing world, nothing is ever guaranteed.

Different Factors

The level of risk you are prepared to take will always be determined by a different number of factors, including your life stage and whether you want to grow your money over the long term or need to draw a regular income.

Typically, your age and relative proximity to retirement determine whether you are investing over the short-term, medium-termor or long-term. What to invest your money into is a big decision and, to better make an informed decision, an independent financial adviser Cheshire will need to look at your financial circumstances, investment objectives and expectations – including the risk level you are comfortable with in terms of stability and cost.

If wanting to invest for many years, you will probably be inclined to take on more risk for your investment portfolio, riding out short-term fluctuations in investment returns and benefitting from potentially higher returns offered by growth investments such as shares.

Approaching retirement, you will be less willing to risk losing money, especially when markets are volatile and the risk of capital loss increases. You would probably put greater emphasis on investing in defensive assets like ash and fixed income.

Types of Investment

Taking a risk with your money is never going to be something that feels comfortable, but in reality, there is no such thing as no-risk investments. You will always take on some form of risk when you invest, it is just the amount that varies between the investment type.

Generally, the more risk you are willing to take, the greater the returns or losses. Risk varies between different types such as funds that hold bonds being less risky than ones that hold shares. There are different risks associated with investing that need to be considered, and these are best discussed with your independent financial adviser Manchester in full detail.

Consulting with an Adviser

Taking structured and educated advice from a financial adviser on the risks associated with investments puts you in a much more comfortable position. Without their advice and experience, you may as well be throwing your money down a well and making a wish.

With an adviser, you have guidance through inflation and interest rates over time, losing value in real terms, and capital, inflation, liquidity, currency and credit risks. This also helps in diversifying your investments by spreading them around, which can lower your risk whilst different asset classes perform well at different times.

A financial adviser helps to manage and minimise investment risk by giving you an educated forecast of how things play out, enabling you to reduce risks and feel more comfortable.

Contact the team at Haven IFA today for more information on making the right choices for investing and keeping your risks low.