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You should not invest in or deal in any financial product unless you understand its nature and the extent of your exposure to risk. You should also be satisfied that any investment recommendation is suitable for you in respect of your circumstances and financial position. Different investment products have varied levels of exposure to risks and to different combinations of inherent risks.
Our core services relate to a diverse range of investments opportunities and products whose prices are dependent on fluctuations in the financial markets outside our control.
“Investments and associated returns or attached income may go down as well as up and you may get back less than the amount you invested. Past performance is no guide or guarantee of future performance”.
Clients should pay particular attention to the relevant advice documentation such as fund particulars, prospectus, key investor information document (KIID) which will accompany all investment recommendations.
Types of risk
Business Risk
The risk associated with the unique circumstances of a particular company as they might affect the price of the company’s securities. It can be affected by a number of issues such as changes in share prices, employee layoffs, gains or losses of contracts, environmental and changes in management.
Default Risk
The day-to-day fluctuation or volatility in a stock’s price, market risk applies mainly to stocks and options. Generally, stocks tend to perform well during a bull market and poorly during a bear market.
Foreign Exchange and Currency Risk
Currency exchange rates can alter the price of an investment. Foreign exchange risk applies to all financial instruments that are in a currency other than your domestic currency i.e £, $ and €. There is a possibility that a profit may be negated once a profit from a foreign investment is converted to domestic currency, especially if exchange rates have drifted since the investment was made.
Inflation Risk
There is the possibility that a value of assets or income will decrease as inflation erodes the purchasing power of a currency. Inflation causes monetary value to decrease over time.
Liquidity Risk
Investments such as fixed interest or variable rate securities, Guaranteed Investment Certificates and mortgage-based investments will fluctuate in value when interest rates change. When interest rates go up, the value of fixed-rate investments decrease. When interest rates go down, the value of fixed-rate investments increase.
Interest Rate Risk
Investments such as fixed interest or variable rate securities, Guaranteed Investment Certificates and mortgage-based investments will fluctuate in value when interest rates change. When interest rates go up, the value of fixed-rate investments drop. When interest rates go down, the value of fixed-rate investments increase.
Opportunity Risk
The risk that a better opportunity may present itself after an irreversible commitment has been executed.
Unsystematic Risk
Sometimes referred to as “specific risk”. Unsystematic risk affects a very small number of assets. An example is news that affects a specific stock such as a sudden employee strike.
Political Risk
Return on an investment could diminish as a result of instability or political change in a region. For example, the action of the United Kingdom voting to withdraw from the European Union caused the British pound to drop in value. The Ukranian – Russian Conflict caused the Ruble to deplete a large amount of its inherent exchange value.
There are several reasons why it is important to define your risk and asset allocation before you invest.
Risk tolerance:
Your risk tolerance is your ability to withstand losses without panicking and selling your investments. If you have a low risk tolerance, you may want to invest in more conservative assets, such as bonds or cash. If you have a high-risk tolerance, you may be able to tolerate more volatility in your investments, such as investing a higher proportion in stocks or funds.Investment Horizon:
Your investment horizon is the amount of time you have until you need to access your money. If you have a short investment horizon, you may want to invest in more conservative assets, as you won’t have time to recover from any losses. If you have a long investment horizon, you may be able to afford to invest in riskier assets, as you have more time to ride out any market volatility.Financial Goals:
Your financial goals will also affect your risk and asset allocation. If you are saving for retirement, you may want to invest in a more conservative portfolio, as you don’t want to risk losing money that you need in the future. If you are saving for a shorter-term goal, such as a down payment on a house, you may be able to afford to take on more risk, as you don’t need the money as soon.
By defining your risk tolerance, investment horizon, and financial goals, you can create an asset allocation that is right for you. This will help you to maximize your returns while minimizing your risk.
