How to assess your risk appetite
Use the following steps to get an idea of your risk appetite.
Step 1 – Know what you can afford to lose
Ask yourself what would happen if you lost some or all of the money you’re putting into investments.
This will depend on your circumstances and how much of your money you’re investing.
Think about people who depend on you financially and any other important financial commitments you need to be sure of meeting.
Step 2 – Work out your goals and timings
Your saving and investing choices will depend on your goals and timescales.
The bigger your goal in relation to the assets or income you wish to invest, the greater the rate of return required to beat inflation and hit your goal.
Taking no risk at all might make your goals impossible to achieve, taking too much might lose you your investment.
At any one time you might have a mixture of short-term or critical goals for which you want low risk (such as saving up to move house), and some non-critical or long-term goals for which you have a higher appetite for risk (for example, saving into a treats fund, or saving towards retirement).
Step 3 – Understand your personal risk attitude
A good way to manage risk is to spread your money across a range of different investment types.
When stock markets are rising, we tend to feel comfortable with market risk, when they are falling, we do not.
Most people are not comfortable with the idea of losing money. On the other hand, we might regret it if we’ve been very cautious and our long-term investments don’t produce the returns we need.
We work with you to keep risks in line with your risk appetite and can spread your money across a range of different investments.