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Risk Tolerance – What Is Your Style?

Risk Tolerance – What’s Your style?


Risk – exposing something to loss – can be applied to many everyday actions that people do. There are different risk profiles which define your attitude towards these risks. These include conservative, moderately conservative, moderately aggressive, aggressive and very aggressive. When it comes to money, people’s tolerances to risk differ greatly; some are more than happy to accept a loss for the potential of large gain (very aggressive), some are willing to risk, but would ideally settle for no less than break-even (moderately aggressive), and some hate the thought of losing anything (conservative), so what is your style?

Michael's View

Personally, my tolerance to risk changes depending on the scenario; however, generally speaking I am willing to take a risk, with the hope of a beneficial outcome, so I would argue that my risk profile is aggressive. I think of risk being more of a mind-set and for me the positive outcome more so than the negative outcome. This perhaps explains either my aggressive outlook on risk, or my poor decision making in the past when it comes to things involving risk – that is up to you to decide. Attitudes towards risk can vary depending on people’s personal circumstances; monetarily speaking, it could be assumed that someone with more disposable funds would be more willing to risk their money, as they have a larger amount of it ‘spare’, so they may be more aggressive. It could therefore be assumed that someone with less disposable funds would be more risk averse, and would want to avoid any loss of money and would therefore be conservative.

Does One's Risk Tolerance Change?

One’s attitude to risk can, and quite frequently does, change. For example, bad experiences where someone has risked something, and the result was the undesired one, they may decide to not take risks like that again. As a result, they may go from an aggressive risk taker to a moderately conservative risk taker. Similarly, someone may have positive experiences with more moderate risks, so they may be willing to increase their risk capacity, and look to take more aggressive risks. Examples of risk like this range from investing in start-up companies to sports betting, where it goes right/wrong the first few times, so the individual increases/decreases the risk accordingly.

Risk Insurance

Attitudes to risk also depend on the type of risk in question, as risk doesn’t just apply directly to the loss of money. Despite being unlikely, there is a risk that your property could catch on fire, you could be in a car crash, or a natural disaster could occur. The result of this would be damage to your property which would cost greatly to repair or even replace; people attempt to mitigate this risk by purchasing insurance. Insurance can provide cover to replace or repair an item(s) that is accidentally damaged or damaged for a reason outside of their control. Insurance is a common example of people not wanting to risk the chance of an event not happening, and people being conservative with this specific risk. There are a broad range of insurances out there, including home/contents insurance, life insurance and redundancy insurance, to name a few. Insurance, however, does not guarantee having no risk.

Is Taking A Risk Worth It?

Ultimately, risk is a part of everyday life; applying for a job, doing a certain activity or even extremes such as longer term risks caused by lack of sleep, stress etc. Arguably we can’t mitigate all risks can we? This is why sometimes it is worth it to just take the risk; we unknowingly take risks all the time, so perhaps risk isn’t so bad after all. This being said, it is important to be responsible and don’t fall out of your depth.

Are You Willing To Take A Risk?

If you are looking to make investments, Ascot Wealth Management caters for all different types of investment risk profiles and needs. Products ranging from Portfolio 1, which contains less volatile investments for those who are conservative investors, to Portfolio 5, which holds more volatile investments for those who are willing to invest more aggressively, is an example of what Ascot Wealth Management can provide. Volatility in investments relates to the price fluctuations of said investments; the higher the volatility, the more likely there is to be a change in the price, the lower the volatility, the lower the likelihood of price changes. Higher volatility is commonly associated with higher potential for growth, but on the other hand, it is also therefore more likely to see greater losses. This is the main determining factor for people when they consider investing – do I want aggressive investments that could potentially bring me higher returns, but run the risk of greater loss? Or do I want more cautious investments for more long term, stable growth, with less risk of large losses? That depends on your style.

Written by: Michael Morris

25 August 2022

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Financial Planning Using Cash Flow Modelling

Financial Planning Using Cash Flow Modelling

For the first half of the year, investors have experienced volatile markets. While it may be easy to look at the short term and see negative returns, it is important to bear in mind the recovery and long term growth which we would expect from the markets. This can be difficult to see and assess the impact of, however an insightful tool to allow investors to see the bigger picture is cash flow modelling, especially when investors are looking at their pensions and retirement aims.

My Parents Situation

Recently I have spoken to my parents about their retirement income. While they are aware of the size of their pensions, and the income they would get from any defined benefit policies, they found it difficult to fully understand how much they could afford to spend each year during retirement, how much longer they needed to work for to ensure comfortable retirement funds, and how much they could rely on their savings as income when we are experiencing such high levels of inflation.

How Does Cash Flow Modelling Work?

Cash flow modelling accounts for all aspects of a client’s funds. It includes bank accounts, income, ISAs and pensions, while also accounting for growth of any investments which they hold. This is particularly important in the years when a client is building up to retirement, to stress test their savings and allows clients to regulate and understand whether they will meet their retirement targets. We are able to create clients an in depth model of their finances, not only to show them any excess funds or shortfall they may encounter in retirement, but this cash flow would also allow them to see whether they can afford larger ad hoc purchases, how much market volatility they can withstand, and how soon they would need to start drawing down on pensions and investments.

Managing Risk

Within these cash flow models, we look at capacity for loss calculations. The current markets are still uncertain, and while we would suggest most investors look to the long term market growth, for some investors their capacity for loss will have substantial impacts on their risk tolerance, and cash flow modelling can help to illustrate whether keeping all funds invested has the potential to lead to a shortfall. This would tend to be prevalent when an investor is looking to drawdown on their funds in the shorter term, and therefore it is important to see how much longer their funds can withstand the market volatility before having an impact on their standard of living. Even in stable markets, cash flow analysis can be an insightful tool to understand how much growth an investor would be aiming for in order to sustain their financial targets. 

How Cash Flow Modelling Can Help You

At AWM we offer cash flow analysis as part of our ongoing financial advice to clients. It allows clients to visualise the bigger picture during the accumulation phases of their financial journey with us, and how it ties into their retirement aims and life goals. We are able to create the model specific to you, including any ad hoc purchases you intend to make, and we can change the model to show how your investments may differ with varying retirement ages. 

Written by: Alice Frost

11 August 2022

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WEBINAR – The latest in the mortgage space

On the 22 September, we will be focusing on the current hot topics in the mortgage space. With everything going on in the world, have investment properties become less attractive? Why is the there a lack in supply of property? and how is this affecting the housing prices?

Join Nwabisa & Mark on the 22nd of September for 45 minutes to and 1 hour of finding out everything you need to know in the current mortgage space. 


What will be covered?

  • The rates increase since December, what’s next?
  • Is property investing still as attractive?
  • How the lack of housing supply is affecting the house prices
  • Energy efficiency & green mortgages

Those who register to the event will be sent a link to the webinar a day prior to the event.


Contact Us For More Info

Ascot Wealth Management Limited is authorised and regulated by the Financial Conduct Authority reference 551744. Our registered office: Scotch Corner, London Road, Sunningdale, Ascot, Berkshire, SL5 0ER. Registered in England No. 7428363. Unless otherwise stated, the information in this document was valid on 3rd February 2017. Not all the services and investments described are regulated by the Financial Conduct Authority (FCA). Tax, trust and company administration services are not authorised and regulated by the Financial Conduct Authority. The services described may not be suitable for all and you should seek appropriate advice. This document is not intended as an offer or solicitation for the purpose or sale of any financial instrument by Ascot Wealth Management Limited. The information and opinions expressed herein are considered valid at publication, but are subject to change without notice and their accuracy and completeness cannot be guaranteed. No part of this document may be reproduced in any manner without prior permission. © 2017 Ascot Wealth Management Ltd. Please note: This website uses cookies. To continue to use this website, you are giving consent to cookies being used.