What is investing?

Is investing right for me?

Investment types

Understanding risk

Understanding risk

The information in this guide was last updated on 01/07/2014

Managing risk

Although you can’t get rid of risk completely, there are ways it could be managed. You could:

  • spread your risk by putting your money into different types of assets with different levels of risk
  • pool your investments by buying into funds that invest your money along with other people’s into a wide range of company assets.

To better endure the ups and downs in the market, investments should be considered as a long term option of at least 6-10 years, ideally longer.

Determining your risk profile

Everyone has their own attitude to risk and it's important to understand yours before making an investment. - To get started ask yourself a few questions:

  • how comfortable are you with the fact your investment is likely to rise and fall in value?
  • have you considered the impact, both immediate and long term, if your investments were to lose value?
  • how would you feel if you didn't reach your investment goals?
  • In general the more risk you are prepared to take, the higher your potential gains. But higher potential reward also means the chances of losing money are greater.
  • A good way to identify the level of risk a fund takes is the amount it invests in shares. The more a fund invests in shares, the higher the potential returns and the risk to your capital.

The greater the risk, the greater potential return. The risk is loss of interest (return) and or loss of all or some of the money invested (capital)

0% shares

0% shares

When reviewing their options, customers would only be prepared to look at deposit savings accounts as the return (interest rate) is known and there is no potential loss to their money.

Customers would feel uncomfortable investing in assets where their money will rise and fall in value or where there is a potential for them to lose any of their money. They are aware that while cash investments are low risk, if the rate of interest is less than the rate of inflation (The rate at which the level of prices is rising) the real value of their money will decrease over time.

Find out more about our Savings options

Up to 20% shares

Up to 20% shares

When investing money customers are only prepared to take a low level of risk that their money and the return may fall in value.

Customers are prepared to invest in assets, such as fixed interest securities (pays a specified rate of interest over the set period), but are uncomfortable with over 20% of their money being invested in shares.

They would be concerned if the investment was to suffer a short term (e.g. a period of 12 months) fall in value.

Up to 40% shares

Up to 40% shares

When investing money customers are prepared to take the risk that investing could lead to a possible reduction in the value of the return or a loss to the money invested.

Customers are comfortable with investing in a broad mix of assets that have a range of risk and reward profiles and with up to 40% of their investment in shares. They also understand that the value of the investment will go up and down over time.

Up to 60% shares

Up to 60% shares

Customers prefer to spread their investment over a range of assets but with a greater emphasis on shares. They’re comfortable with having up to 60% of their investment in shares.

They also understand that the value of the investment will go up and down over time and are prepared to take a greater level of risk that it could lead to a possible reduction in the value of the money invested.

Up to 80% shares

Up to 80% shares

Customers are prepared to take a greater level of risk to achieve a greater potential return. They’re comfortable with having up to 80% of their investment in shares.

They also understand that the value of the investment will go up and down over time and are prepared to take a greater level of risk that it could lead to a possible reduction in the value of the money invested.

100% shares

100% shares

When investing, the primary aim is to achieve a high return on their investment, while taking a higher level of risk.

Customers focus on investment funds which offer greater potential for growth and appreciate that this comes with a high level of risk. They understand that the value of the investment can change rapidly and by a large amount in the short term (12 months) and that there is a greater risk to the original money invested.

They also understand that the value of the investment will go up and down over time and are prepared to take a high level of risk that it could lead to a possible reduction in the value of the money invested (capital) and the interest (return).