Understanding how investment markets can fluctuate, and being prepared for when share markets take an unexpected downturn, can take patience and a strong resolve. Investors need to keep in mind that historically these unexpected downturns are typically followed by a period of growth that sees investment values return to higher levels over time.
The key element to any investment decision is understanding your appetite around the risks associated with investing, and your tolerance to weather short-term losses, weighed against likely long-term gains.
Risk to some may mean the possibility of losing a portion of their capital, while for others it may mean the possibility that their investment doesn’t generate sufficient income for them to live on.
Investors also need to understand the difference between their ‘appetite’ for risk, and their ‘capacity’ for risk. Investors with only a short investment time horizon, such as those contemplating retirement, may not have the capacity to sustain losses from which they are unable to recover in the limited time available before leaving the workforce. Any assessment of risk appetite should be in the context of your objectives and the timeframe in which you wish to achieve your objectives.
We can help you better understand your attitude to investing and your tolerance to investment risk. This will enable us to tailor investment advice that is best suited to your specific individual needs, taking into account your personal goals and objectives.