What is a risk profile?

What is an attitude to investment risk?

If you’ve ever taken advice, or used online tools to invest within an ISA or pension, you’ve probably heard the term ‘risk profile’. This is a term so common in the advice industry that we forget it’s not a term that most have encountered before.

By investing money, you are taking some investment risk. How much investment risk you’re taking will depend on your assessed ‘risk profile’.

Risk Profiling Questionnaires

If you take financial advice, your adviser will walk you through a risk profile questionnaire. This is a psychometric quiz to help decide how much investment risk you’re prepared to take with your money.

A good risk profile questionnaire will not only consider your personal attitude to money, but also the amount of time your funds will have in the markets, and whether you plan to generate income. Your attitude to investment risk is essentially the amount of volatility (the ups and downs) you can suffer on your investment journey.

Types of Investment Risk Profile

If you’re the sort of person who would worry at the point of an investment loss, you likely have a ‘cautious’ risk profile. If you would absolutely not tolerate investment fluctuations, you’re ‘risk averse’.

Investment risk for pensions

In all likelihood, a novice pension investor would find themselves with a ‘balanced’ risk profile. This is because, particularly with pensions, you’re prepared to invest your funds under a reasonable mandate, to make steady growth. Investing pension funds is quite different from investing your cash.

Pensions can’t be opened before minimum pension age (55 years). This means pension investments have a good time in the markets to ride volatility. If you wanted to invest some money from the bank, but need short-term access – you absolutely shouldn’t be investing in the markets, no matter what your risk profile. Short term volatility could mean a dip in value at the point you need your money back; that’s when investors lose out. Investment markets are unpredictable as influences on the markets cannot be controlled (ref. Covid-19!)

Should I just go for balanced?

A balanced risk profile fits most people. Balanced portfolios should be highly diverse in terms of investment assets and geographical spread. A balanced investment should, however, still have a minimum investment terms of 3 years.

Those who can afford to take a high risk with their money probably don’t have to – as they’re already wealthy. Those wanting to take high risk might not be able to afford to, as a large loss could affect their financial security. That’s often why we see a lot of balanced risk profile results.

To find out more about your risk profile, get in touch. We can send you some of the tools professional advisers use!


Pension News

Categories
completing the retirement puzzle
Defined Benefit Pensions
reviewmypensions

UK Pension Consolidation

Combining UK pension plans into one pot It’s rare for someone to work for the same employer throughout their career. With job and location movements

Read More »
Pension Jargon
reviewmypensions

NEW! Pension Knowledge Test

FREE Online UK Pension Knowledge Test Our quick quiz consists of 5 pension technical questions for you to test yourself on, with instant results. We’re

Read More »
UK Pension Planning
reviewmypensions

Pandemic Pension Planning

Retirement planning in lockdown We’ve had a lot of questions about how the pandemic will affect pension and retirement plans. Like with the crash in

Read More »

Speak to a Professional

We introduce clients to regulated, professional and qualified advisers across the UK and internationally.

Our panel of adviser firms must undertake a comprehensive due diligence process. We only refer to firms with locally-appropriate regulation and insurance.

Ask us anything

didn't find what you are looking for?

search Our Site

About This Site

Whilst every care has been taken in the preparation of our website and publications, they are intended as a guide only. Readers are advised to seek professional regulated financial and tax advice before making any changes to their planning or investments. Our publications, including website and guides do not offer investment or pension advice and nothing in them should be construed as investment or financial advice. Our publications, including guides and website are not, and should not be seen as, a recommendation to use any particular investment or planning strategy.

You must carry out your own research before making any investment decision or change to your planning. The information published has been obtained from sources that we believe to be accurate. Although reasonable care has been taken, we cannot guarantee the accuracy or completeness of any information published. Articles and opinions published may be wrong and may change at any time. You must always carry out your own independent research and verify information and data you collect before making any financial decisions or planning changes.

Financial and pension planning is complex, and must be tailored to the individual client’s needs, objectives and circumstances. Teach Learn Resources Ltd do are not regulated by the Financial Conduct Authority and do not offer financial or tax advice. Our only business is to act as a professional introducer to regulated IFA firms worldwide. Contact us for more details about our panel of approved adviser firms and the regulation held in your jurisdiction.

Please see our Privacy & Terms for more information about the company, protection of your data and terms of use.

All content on this website and associated publications have been written by us and is the intellectual property of Teach Learn Resources Ltd. We take plagiarism seriously; our lawyers are watching.

Reviewmypensions.com is a trading style of Teach Learn Resources Limited. Teach Learn Resources Limited is registered in England and Wales company number 13349666. Registered Office 591 London Road, Cheam, Sutton, England SM3 9AG.

All rights Reserved