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Investment Risk/Return Profile

The Chinese character for "RISK"
also means "OPPORTUNITY".
(Our thoughts precisely)

"To get profit without risk, experience without danger, and reward without work is as impossible as it is to live without being born"
A.P. Gouthey, Philosopher.

We need to better understand your investment risk/return profile before providing investment advice. The following three questions, when combined with investment time frame helps to define your risk profile.

  1. What is your risk/return trade-off?

You are the holder of an internationally diversified portfolio of investments. Specific risk (that is risk related to individual investments) has been diversified away by the use of investment funds. How much market risk (that is the amount of movement in the investment up or down) can you comfortably endure for the prospect of higher returns in the long term?

1.   Variation in return +3% to -1%
2.   Variation in return +7% to -3%
3.   Variation in return +11% to -5%
4.   Variation in return +15% to -7%  

Please enter the number of your choice 

  1. How long can you comfortably endure temporary paper losses in exchange for the prospect of higher returns over the long term?

1.    I am not prepared to endure temporary paper losses
2.    I could stand temporary losses for up to 6 months
3.    I could stand temporary paper losses for up to 2 years
4.    I could stand temporary paper losses for up to 3 years  

Please enter the number of your choice 

  1. Do you want growth or income?

1.    Income ONLY
2.    Mainly Income with a little Growth
3.    Some Income but mainly Growth
4.    Growth ONLY

Please enter the number of your choice 

Timeframe

My/our investment timeframe is:

1.    Short term 1-2 years
2.    Medium term, 3-10 years
3.    Long term, 10 years or more

Please enter the number of your choice 

Based on your answers we estimate your Risk Profile as:

Your investment risk/return profile is:     

What is Investment Risk?
The variability of returns is investment risk.  It is important to realise that returns do fluctuate, even fixed interest.  At times there may even be negative returns.

Investment
Sector

Historical Average
Real Rates of Return (%)

Volatility
(or investment risk)

Cash

0.0%-1.0%

+/- 4.4%

Fixed Interest

1.0%-1.5%

+/- 7.1%

Property

2.0%-3.0%

+/- 3.8%

Equities

5.0%-6.0%

+/- 21.2%

Small Companies shares

8.0%-9.0%

+/- 35.2%

Managed Futures

8.0%-10.0%

+/- 20.0%

Real Rates of return equals the declared return less the effect of inflation. The volatility figure represents the amount that returns may be expected to differ from the average in any one year. For example, property returns can be expected to be between –(1.8%) and 6.8% the majority of the time.

For more information on this topic refer to:
Portfolio Construction 

Disclaimer:
Before making an investment decision on the basis of this Risk Profiler, you need to consider, with or without the assistance of a financial adviser, whether the decision is appropriate having regard to your individual investment objectives, financial situation and personal needs.
The Risk Profiler is a simple tool based on limited information and as such should not be relied on solely when making investment decisions.
 


 

 

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