Investment Risk Return Profiler
Financial Calculators
To get profit without risk, experience without danger, and reward without work is as impossible as it is to live without being born.
Your investment risk-return profile
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.
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Q1: 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? |
Asset allocation
| Risk-return Profile | % growth assets | % defensive assets |
| Defensive | 10 | 90 |
| Conservative | 20 | 80 |
| Balanced | 60 | 40 |
| Growth | 70 | 30 |
| Aggressive | 98 | 2 |
In our blog the randomness of investment returns we discuss how annual returns vary randomly with region and asset class. The key is time in the market versus timing the markets.
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. Refer to our blog The average market return.
| Investment sector | Historical average, real rate of return | Volatility (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 | 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.
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.