Understanding risk

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.

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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.

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.

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.

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.

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).