What Risk Are You

Mortmain

No risk - deposit based investments, you money is not actually exposed to any asset clas, rather it sits there and tracks the performance of one or more (usually equity indices) you do get 100% capital guarantee on maturity and generally it will beat deposit rates, however there is no access to your cash before maturity and potential growth tends to be capped. EXAMPLE - Tracker Bonds, Typical term 3 - 6 years.

Low risk - Part of your capital is directly exposed to a fund which is usually diversified across a number of asset classes e.g. equities, property, bonds and cash. The partial exposure means that you can expect higher potential returns whilst the asset diversification spreads your risk. Typically, these funds will offer you a capital guarantee at a specified date in the future, however if you require early encashment, you may recieve less than you initally invested, there will also be Early Encashment penalties. EXAMPLE - Protected/Guaranteed Balanced Funds, Typical term 5 - 7 years.

Medium risk - largely as above but 100% of you capital is exposed to the fund. his gives you the potential for superior growth but does not offer a capital guarantee. EXAMPLE - Managed Balanced Fund with a 60%+ equity focus or a property fund with no gearing. Typical term, 5 - 7 years

High risk - 100% capital exposure to a single asset class or a diversified fund where gearing is present. In the case of the former, your capital is invested soley in equities, often with a specific geographical or sectoral focus. This gives you the opportunity to benefit from 100% growth but also to suffer from potentially large losses in the event of a downturn. In relation to gearing, this is where your capital is used by the fund managers to borrow monies to invest in further assets - usually properties. Whilst this will give you an exposure to an portion of the asset class which may be 200 - 300% above the value of your investment, you must bear in mind that if the market falls, the lenders have to be repaid before the investors can take their monies back. EXAMPLE - 100% equity based fund or Geared Property fund, Typcal term, 7 yrs+

daveirl

This post has been deleted.