Is your ‘attitude to risk’ high, low, or somewhere in the middle?

Did you know as an investor, your ‘attitude to risk’ can be adjusted to reflect your changing circumstances?

This newsletter, we spoke to Harmy Bains, a Lloyd & Whyte Independent Financial Adviser (IFA) about ‘attitude to risk’ and how it relates to investing and management of portfolios.

What is ‘attitude to risk’?

Attitude to risk (also known as ‘risk appetite’) determines the level of uncertainty and exposure to risk that the investor is willing to take. It is an integral part of the investing process, as your personal attitude to risk will determine how investments are managed.

Attitude to risk is usually established during your first meeting with your IFA, where the type of investments used to reach your financial goals will be established.

It’s important for us to understand your attitude to risk so that you can potentially achieve your financial goals. Bear in mind that as an investor your attitude to risk may change.

Levels of risk

There are usually three levels of attitude to risk: high, medium and low.

Some factors affecting your attitude to risk can include:

• Your age
• Your personal circumstances (i.e., income or employment status)
• Life goals
• Economic climate – recession or growth

High attitude to risk – factors

Some investors are willing to take a higher level of risk in the sectors and businesses they invest in for potentially greater and possibly faster returns.

Clients who have a high attitude to risk can be:

• Prepared to invest longer-term.
• Willing to accept some losses for a potentially higher return over time.
• Focused on maximum returns.
• Willing to access their funds in the longer term; not necessarily immediately.
• Possibly a younger investor, with more time to invest.

They may have received an inheritance with a longer investment horizon, for example, the investor may live for another 10-15 years, then pass their portfolio on to their children who will not access the investment for another 15 years (perhaps to fund their children’s education).

If there are changes in your circumstances, your attitude to risk may need adjusting to a medium or low risk category. Changes in circumstances around investing can include having a child, loss of job, approaching retirement, or receiving an inheritance.

Medium attitude to risk

Clients who have a medium attitude to risk can be:

• Focused on a moderate return on investment (ROI).
• Willing to face some level of risk.
• Looking to access funds on a regular basis.
• More likely to be in a phase of drawing money from investments, for example, for retirement or university fees.

Low attitude to risk

Clients with a low attitude to risk may be looking for ‘safer’ investments with a slower, lower return and a potentially decreased risk of losing money.

If you have a low attitude to risk, you may also be looking at a shorter-term investment horizon. This could be because you need access to capital and want to reduce exposure to the ups and downs of the market.

Clients who have a low attitude to risk can be:

• Willing to aim for lower returns in exchange for more chance of stability and potentially reduced risk.
• Looking to regularly access their investments.
• Approaching retirement, planning a wedding, or funding university.

As our client you are provided with a minimum of one review per year where we will discuss your current attitude to risk and how it is working for you.

Please note: The value of investments can fall as well as rise, and you could get back less than you invest. If you’re not sure about investing please seek professional advice.

Evaluations

If you’re not sure where and how your current attitude to risk relates to your portfolio, you can ask us to provide you with an evaluation or breakdown of the performance of your investments. You can also review your existing investment strategy with us, in advance of the date of your annual review.

By talking to your IFA you can benefit from:

• Investment advice in line with your attitude to risk.
• Periodic review of all aspects of your plan to assist you in potentially maximising the performance of your portfolio.
• Our expertise in helping your financial strategy to remain on course and relevant to your objectives.

If you would like to review your investments, pensions and retirement plans with us, please book an appointment through our online booking portal.

Alternatively, email us at:

fsservice@lloydwhyte.com

What matters to you, matters to us

1. www.gov.uk/government/publications/the-ten-point-plan-for-a-green-industrial-revolution
2. blog.evbox.com/ev-battery cost#:~:text=Besides%20lithium%2C%20EV%20batteries%20commonly,of%20an%20EV%20battery%20significantly
3. https://www.zap-map.com/ev-stats/ev-market/#:~:text=How%20many%20electric%20cars%20are,growth%20of%2040%25%20on%202021
4. https://www.joinbonnet.com/post/do-you-pay-road-tax-on-electric-cars
5. https://bookmygarage.com/electric-vehicles/how-much-does-an-electric-battery-cost-uk/
6. https://tradingeconomics.com/commodity/lithium
7. https://www.moneysupermarket.com/car-insurance/tesla/

Lloyd & Whyte (Financial Services) Ltd are authorised and regulated by the Financial Conduct Authority. Registered in England No. 02092560. Registered Office: Affinity House, Bindon Road, Taunton, Somerset, TA2 6AA. It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Calls may be recorded for use in quality management, training and customer support.