How much risk you are willing to take with the investment products you hold within your portfolio. Higher risk products invest in more volatile markets – the potential for gain and loss is consequently higher. Lower risk products invest in more stable markets – you may not gain as much, but the aim is you will not lose as much either. It is important to understand how much risk you are willing to take to ensure your investment products remain suitable for you. See also Capacity for Loss.

See the impact of risk in action

The interactive chart below (best viewed on desktop) demonstrates the relationship between risk and reward. Each bar in the chart represents a different risk level portfolio, from very cautious on the left, to highest risk on the right.

As you select each individual bar, you will see the best and worst periods for each portfolio type, and the average return for the portfolio, over the timescale selected. The chart is based on data going back to the early 1900s.

You will see that the higher risk portfolios deliver a higher level of return over the long term, but in the short term the losses can be more painful compared to lower risk portfolios.

As part of our Financial Planning process, we will determine at outset a suitable level of risk that you are comfortable with, that delivers the growth required for your Plan to be successful, whilst ensuring your Plan is sufficiently robust to withstand difficult periods. We will regularly review this with you as part of our Forward Planning each year.