Financial Risk Profiling

What level of financial risk are you prepared to bear?

Deciding on the level of financial risk you are prepared to take for the returns you want from your portfolio is probably the biggest investment decision you will make.

But the real meaning of financial risk may not be what you think it is.

Risk does not necessarily mean the chance that you will lose your money.  Financial risk actually means how big is the range of final outcomes.

Low and high portfolio risk strategies

Adopting a low risk strategy means you will get a low return.  A high risk strategy may mean high return – or you may also get a low return – but high returns are not possible without high risk.  Deciding whether you are a risk-taker or more conservative with your investment portfolio is the key input you make to your financial plan. This is also the key concept behind asset allocation.

Find out more about asset allocation »

It is natural for people to want high returns on their portfolio. Yet high return investments will have high volatility, when the value may drop significantly for short, sometimes long times. If you are not well prepared for this, stress levels rise dramatically.

At Archimedes Financial Planning, we assist you to find the right balance between risk and reward at the start of an investment.

Showing you the possible range of outcomes in your portfolio risk

We provide educational material (PowerPoint presentations, Excel-based risk profiler) that allows you to decide your preferred level of risk, and to understand and appreciate the range of possible outcomes before we invest.

This process is called Financial “Risk” profiling. It is legally required of every investor, to determine his or her tolerance of investment volatility. Higher volatility tolerances are expected to generate higher returns, in the long run.

But the level of risk is always your decision. There is no one-size-fits-all in our strategies - you decide on the right level of risk tolerance for you.

Need more information?

 

Contact us to discuss our approach to risk profiling and how it can benefit your situation.

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