Risk & Reward

Our investment management Newcastle team explain why Risk is often overlooked by the individual investor. Risk is arguably the most important factor when considering your approach to investment strategy. How long you decide to invest, your investment spread and most importantly your capacity to absorb investment losses must all be thoroughly assessed before making your final investment decision.

Different people have different attitudes to investment risk and you need to be clear about the degree of risk you are willing and able to accept. This can sometimes prove complicated as all investors have a different view of what they consider risk to be. There is a balance between risk and return and, generally speaking, high risk investments can potentially provide the investor with the ability to acheive higher investment returns, however, with this higher risk the potential for loss of funds is also increased. As you may expect therefore, generally speaking, lower risk may offer the potential of lower returns, however investors must note that nothing is ever set in stone.

Risk is also related to how long you view your investment timeframe. In the stocks and shares market it may be considered that a long-term approach is prudent and most commentators advise that this requires a minimum investment term of 5 years.

Risk can also relate to how you invest. Investors wishing to minimise risk should consider diversity and therefore a broader investment spread may be prudent, as opposed to investment in one specialist area. As the saying goes, don’t throw all your eggs in one basket.

It is important to remember when considering investment however, that past performance is not a guide to future performance/returns and the value of any investment can go down as well as up.