Investment Risk

August 27, 2021

Let me say first of all that when anyone invests money there WILL BE SOME RISKS INVOLVED. How much depends on the individuals choices and approach. Let me explain. 

ALL investments have risks involved and as you can imagine – some risks are higher than others. What we do at MAP is divide all funds into 5 categories – although we mainly use only 3 of these (2, 3 and 4). 

Category 1 risk is the situation where you have very little risk at all such that the chances of losing money are small if not negligible. If you choose this category though you will get very little growth in return and an example of this is bank interest, and this explains why this is not used a great deal as returns don’t cover costs. 

Category 2 risk is where someone is looking to invest and make returns at least more than inflation, and the chances of loss are not that high. Such investments are not in high volatile areas – hence the low-risk rating.   

Category 3 is middle risk and there is a chance of losing money, although no-one will say how much.    

Category 4 is high risk where you could lose a significant amount of your investment and finally 

Category 5 is where you could lose everything, and that’s why we very rarely use this one – as you can imagine.     

At MAP we do a spread of funds when we invest a clients money because that spread alone will reduce risk, and I would say that anyone investing should not put all their eggs into the one basket – but take a spread. 

When we invest a clients money, it is the client who chooses what risk levels they want and what they are comfortable with, and that choice is not cast in stone and can be changed as and when the client wants. This ensures that the risk levels are kept to comfortable levels.  

When we do investments, we do a lot of research on what funds we are going to use, and this alone will reduce risks, because we only use those funds that have a good consistency over time – thus reducing risk.     

Remember that at the end of the day, you will only get a return if you take some risks, so there will always be risks there – you just have to watch them, but if you control things along the lines discussed here, you can reduce risks levels to what you are comfortable with.   

The material is for general information only and does not constitute investment, tax, legal or other form of advice.  You should not rely on this information to make (or refrain from making) any decisions.  Links to external sites are for information only and do not constitute endorsement. Always obtain independent professional advice for your own particular situation.  Money Advice & Planning Ltd is authorised and regulated by the Financial Conduct Authority.  For any enquiries, contact Andrew on 07957 836211 or