Goal Based Investment Risk Profile

Transcription

1 Goal Based Investment Risk Profile Introduction Income / Growth from my investments You will have read the explanatory text on screen when completing the Goal Based Investment Risk Profiler. This explained that by answering the 8 questions a score could be calculated that could be matched to the mostly likely of the Efficient Frontier asset allocations that corresponded with your attitude to investment risk and expectations of return for the specific goal. An Efficient Frontier represents the optimum portfolio for a given risk and return. The factors that determine the suitable portfolio for you are the amount of risk you are comfortable with and the amount of return you need to reach your financial goal. The investment strategy needs to place assets in a mix of appropriate vehicles that offer a risk level and potential return that you are comfortable with over the length of your investment. This report will confirm in writing the results of that process so that you have the opportunity to study your answers to these questions, thereby allowing you the opportunity to amend your answers should you subsequently feel they do not accurately reflect your feelings. The results report will start with a brief summary of your personal details as shown: Personal Information Listed below is a summary of your personal contact details and brief investment information. Please check that these are accurate. Name Address Mr Client Goldsmiths House Cambridge Street Aylesbury Bucks HP20 1RS Home Telephone Work Telephone advice@mdgifa.com Date of Birth 06/03/1964 Goal Income / Growth from my investments Length of investment 16 Years

2 Questions Listed below are the questions as they appeared on screen and your answers as highlighted. Please take the time to study these carefully as this will form the basis upon which our recommendations have been formulated. Should you wish to alter your answers please notify your adviser so that your scores can be recalculated. Question 1 How would you rate your investment knowledge? - Minimal - I consider my knowledge to be fairly limited - Modest - I've been investing for a few years and I sometimes read the business press - Moderate - I've been investing for several years within a broad range of different assets - Good - I've been investing for quite a while and I've lived through at least one market downturn - Very good - I'm an experienced investor and am comfortable with all the ups and downs in the market Question 2 I need to be sure that my capital is secure, even if this means earning less investment return. - I strongly agree - I agree - Not sure - I disagree - I strongly disagree Question 3 The chart below shows the highest one-year gain and the highest one-year loss on five different hypothetical investments of 10,000. Given the potential movements in any one year, where would you invest your money? - Fund 1 - Fund 2 - Fund 3 - Fund 4 - Fund 5

3 Question 4 High expected long term investment returns are important to me and it does not matter if my investments temporarily fall in value, I will continue to hold them until they recover. - I strongly agree - I agree - Not sure - I disagree - I strongly disagree Question 5 If you didn't need your capital for more than 10 years, how long would you be prepared to see your investment performing poorly before you cash it in? - You would cash it in if there was any loss in value - Up to 6 months - Up to 1 year - Up to 2 years - More than 2 years Question 6 The chart below shows the return on 10,000 invested in three different investments over the last 10 years. Given the potential gain or loss over the whole 10 year period, where would you invest your money? - Fund A - Fund B - Fund C

4 Question 7 What would your reaction be in the 12 months after placing your investments, if you discover that, in line with what is happening in the financial markets generally, your portfolio has decreased in value by 25%? - Horror, security of your capital is critical and you did not intend to take risks - You would cut your losses and transfer your money into more secure investment sectors - You would be concerned, but would wait to see if the investments improve - This was a calculated risk and you would leave the investments in place, expecting performance to improve - You would invest more funds to lower your average investment price, expecting future growth Question 8 Most investment decisions involve both the possibility of making money and a chance of losing all or a portion of it. For many investors, the possibility of losing a set amount is more significant than the possibility of making a corresponding profit. For this investment decision, which seems more significant to you? - I would consider the potential loss first as I don't want torisk any of my capital - I would consider the potential loss somewhat more as I don't want to risk too much of my capital - Don't know - I would consider the potential gain first and be willing to take some risks to see higher returns - My focus would be on the potential longer term gains and I would be willing to take the risks in this context Results Based on your answers to the question posed, this section will now summarise your results. Hopefully, having validated your answers in the checklist on the previous page, you should find that the results shown below concur with your investment objectives. Please use this opportunity to discuss the results with your adviser as the recommendations shown later in the report will be based on these scores. Recommendation Your risk return profile has been determined by the weighting of your responses to specific questions. The calculated risk profile from the answers to the questionnaire suggests that you should use an efficient frontier portfolio as detailed below: Moderate 16 Years You accept that an increased investment risk is inevitable if you are to achieve attractive real returns. Investments in this category usually offer reasonable growth potential in the medium term. Although risk is reduced through diversification across markets, the Fund Manager can use this wide choice of assets to adjust exposures according to specific market conditions. You should note that these funds are subject to market movements and currency risk.

5 0 % Cash 11 % Government Bonds 11 % Corporate Bonds 33 % UK Equity 14 % US Equity 4 % EU Equity 2 % Japan Equity 25 % Property Appendix A Defining the Efficient Frontier Risk Categories This appendix provides a full description of the Efficient Frontier categories for Risk Tolerance and Return Expectation, these categories being used within the Goal Based Investment Risk Profiler. Risk Tolerance The six efficient frontier categories below describe the various levels of tolerance to investment risk and excepted return NO RISK You have no tolerance to investment risk, you should consider paying off any debts that you may have and then building up a reserve in a high interest deposit account or national savings. VERY CAUTIOUS You have a low tolerance to investment risk. This implies that you would accept a small amount of investment risk to achieve the growth that you require, but only if this can be achieved with a low degree of price volatility. Whilst your tolerance to risk is low, you recognise that diversification is important and therefore, you accept a limited amount of equity exposure. Although the volatility of your asset mix may be less than that of the Moderate Portfolio, you accept that by taking a conservative approach, inflation may reduce the purchasing power of your savings. You should note that these funds are subject to market movements. CAUTIOUS You accept that investment risk is inevitable if you are to achieve reasonably attractive real returns. Funds in this category usually offer reasonable growth potential in the medium term and can produce an income. Similarly, their currency risk is reduced through limiting the exposure to overseas assets, however you should note that these funds are still subject to market movements. MODERATE You accept that an increased investment risk is inevitable if you are to achieve attractive real returns. Investments in this category usually offer reasonable growth potential in the medium term. Although risk is reduced through diversification across markets, the Fund Manager can use this wide choice of assets to adjust exposures according to specific market conditions. You should note that these funds are subject to market movements and currency risk.

6 AGGRESSIVE You have a willingness to accept high investment risk. This enables you to include wide range of equity assets with good long-term growth prospects. Although asset class diversification will usually be compromised in an effort to achieve higher real returns, the Fund Manager can use both UK and overseas equities to react to specific market conditions. You should note that these funds are subject to market movements and currency risk. VERY AGGRESSIVE You have a very high tolerance to investment risk. This will allow you access to a wide range of funds, which will target specific assets with potential for high growth. These funds can offer a high level of real return in the longer term. As they focus on asset types or specific markets that undergo a high degree of price change, they can, and often do, experience greater than average volatility. Diversification will usually be compromised in an effort to achieve higher real returns and there will be a significant chance that the value of your assets may fall and could take several years to recover their original value. It is likely that you are looking to invest over the long-term. You should note that these funds are subject to market movements and currency risk.