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Spectrum’s guide to Investment Risk

riskguide

At Spectrum, we believe clients need to understand contracts, pros and cons, tax treatment and of course, investment risk.

Our Peter Brooke has written a series of articles on “risk” and asset descriptions. We intend to build a library of our adviser’s views in this area. These views are influenced by the Continuous Professional Development training our advisers are exposed to. We are using training resources of some of the biggest names in Financial Services, BlackRock, JP Morgan, the Prudential to mention a few.

We confess … we will not always suggest the very best investment strategies, our fund selection process eliminates some of the more exotic investment opportunities, as we believe our clients, much prefer to take a safer route. We will only use daily traded, EU compliant funds, usually from the very top brand fund managers. Where we propose structured notes, usually for a fixed term, these will be straight forward and easy to understand. In both cases, we will not take an initial commission, if one has to be paid, we will rebate it in full to our clients.

Gareth Horsfall’s view on clients in Italy

“In my years of working with clients in the UK and in Italy I have come to the conclusion that people measure their own investment risk in terms of their fears of investing, and during my work with people from all walks of life I think that these fears elicit themselves in 2 ways.

The first of these is what I like to call the ‘Big Black Hole risk’: that is the question, ‘If my money disappears down a big black hole what are the chances of me getting it back?’

This, naturally, is a fear most people have and one that warrants discussion. Thankfully, at The Spectrum IFA Group we work to the highest standards and only collaborate with companies and asset management firms that are highly regulated and have a sound track record. We do not advise our clients to invest their hard earned monies in any ‘get rich quick’ schemes or with companies without a long and proven track record and because of this and the processes we have in place, we believe that the risk of your money disappearing down a big black hole is almost zero.

The other fear that people have is ‘What is the chance that I will have the same amount I invested or less when I most need it?.

At The Spectrum IFA Group we have full due diligence procedures and compliance processes in place to make sure that whatever advice we give our clients it is based on their complete set of circumstances at the time of inception. We ask alot of questions and discuss everyone’s atttitude to investment risk. However, life is not so linear and at times it may be that your financial affairs needs to be changed to represent your life, at the time. We will regularly monitor this for you and will work with you to ensure that, whatever happens, your financial plans meet your requirements. In this way, when you most need your money, you should have it.”

Spectrum’s Peter Brooke’s series on Asset Classes and Risk

I believe risk is like energy… it is not created or destroyed… simply changed from one type of risk to another. If we build a total asset portfolio with this in mind we can make sure that we understand each assets risk profile and ensure we aren’t taking too much of any type of risk…

for example a very well diversified portfolio as follows could be broken down as:

diversified portfolio

ASSET VALUE RISK TYPE
cash 60000 interest rate
property 250000 liquidity
pension equities 100000 investment
pension bonds 50000 credit
investment equities 125000 investment
investment bonds 75000 credit
art 15000 liquidity
collectables 10000 fashion
gold coins 20000 security

 

But when we total up the risk there may be too much of one type (eg liquidity or investment) and more diversification is needed… or we may be happy with the spread of types of risk.

diversified portfolio 2

 

 

 

 

 

 

More on risk and investing in different assets