Financial Control Explain: What is Risk?

Looking at potential upside and potential downside of an decision. You then make an informed of what action to take.

EVERYONE takes some form of risk in their daily lifes.

 

Did you ever using your mobile phone while driving?
Did you ever park your car in a town or city centre but choose not to put a parking ticket on it as you would only be a few minutes?
Did you ever exceed the speed limit on the roads at any time?
Do you do the lotto / place bet in bookies?
Do you drink alcohol or smoke?
Do you have a security alarm in your house?
Do you have life cover / illness cover etc?


You know upside v downside and make a calculated risk decision.

We will demonstate to you the potential upside and downside to your investment so you can make an informed decision with a risk level that you are comfortable with.

Risk: what type of investor are you?


Before investing, you should decide:
• What you want to achieve with your investment.
• What levels of investment risk you're comfortable with.
• How long you're happy to invest your money for.

We have many different types of funds you can invest in, and so deciding what you want to achieve with your investment is important because it will help you make decisions about where to put your money.

ESMA (European Securities and Markets Authority) has 1-7 Risk Rating on volatility ratings. These ratings are based on a scoring system of 1 – 7 with each Risk Class or score having a volatility range. Guidelines as follows:

Lower risk and reward investors
'1 - Very low risk' investors: unwilling to accept any significant risks, accepting the prospect of low returns to achieve this.
'2 - Low risk' investors: likely to accept limited risks and want to try to avoid large fluctuations in the investment value, accepting the prospect of more modest returns to achieve this.
'3 - Low to medium risk' investors: likely to accept some risk in return for the potential of higher investment gains over the long-term. Try to avoid large fluctuations in the investment value, but accept there will be some fluctuation, particularly over the short-term.

Medium risk and reward investors
'4 - Medium risk' investors: likely to accept significant risk in return for the potential of good investment gains over the long-term. Accept significant fluctuations in the investment value, particularly over the short-term, but want to limit the amount of money held in more risky investments.

High risk and reward investors
'5 - Medium to high risk' investor: likely to understand that the investment can go down and up sharply with the potential for greater returns over the long-term.
'6 - High risk' investor: likely to aim for high possible returns and accept higher levels of risk, recognising that the investment value may fluctuate very sharply, particularly over the short-term
'7 - Very high risk' investor: likely to aim for the highest possible returns and accept the highest levels of risk, recognising that the investment value may fluctuate very widely, particularly over the short-term.