Some clients are naturally more cautious than others. Many investors value certainty, security and preservation over the opportunity to try and achieve higher returns. Some are more willing to accept higher risks to target higher returns. However, there is a trade-off between risk and reward and an investor’s appetite for risk is often unrelated to the investment horizon for any given investment.
With this in mind it is important that we establish three facts about risk for you, your tolerance to risk, your capacity for risk and your need for risk. It is only once these have been established that a suitable solution can be recommended for you. We identify your tolerance to risk by using the services of one of the world’s premier risk management consultancies, FinaMetrica, whilst your capacity and need for risk are identified with the help of the bespoke software used in the creation of Your Succession Plan.
Along with considering your attitude to risk, we would also need to look at your actual capacity for loss. By “capacity for loss” we are referring to your ability to absorb falls in the value of your investment over the intended period of your investment.
Almost every investment has the propensity to fall in value. It is a fundamental principle of investing that the investor should understand and be willing to accept any/some potential losses in the hope of achieving the returns they require.
The value of investments can fall as well as rise and you may get back less than originally invested