Risk ratings

Risk 1 - Cautious

You are prepared to take only a small amount of investment risk and it is important to you that your capital is protected. This means that your portfolio will concentrate on investments that provide low returns in the long term but present lower risk to your capital. Only a small amount of riskier assets will usually be included in your portfolio to increase the chance of obtaining better long-term returns.

A typical Cautious investor will be invested mostly in fixed interest gilts and bonds as well as in cash, with a small element in equities and property that can boost longer term returns but are associated with more risk. Using a broad range of assets gives you a varied portfolio and that diversification helps to reduce the overall levels of risk.

Risk 2 - Cautious to Moderate

You are prepared to take limited investment risk to increase the chances of achieving a positive return, but you only want to risk a small part of your capital to achieve this.

A typical Cautious to Moderate portfolio will usually have the larger part invested in fixed interest gilts, bonds or cash that are low risk but offer only low returns. The remainder of the portfolio will usually be invested in equities and property which can boost longer term returns but are associated with more risk.

Using a broad range of assets gives you a varied portfolio and that diversification helps to reduce the overall levels of risk.

Risk 3 - Moderate

You are prepared to take a moderate amount of investment risk to increase the chance of achieving a positive return. Capital protection is less important to you than achieving a better return on the investment.

A typical Moderate investor will usually invest in a variety of assets to obtain diversification and therefore reduce risk. Equities and property, which can boost longer term returns but are associated with more risk, would often account for a higher proportion of assets than fixed interest gilts and bonds or cash. At shorter investment terms the proportion of higher risk assets is usually reduced.

The range of asset types helps reduce the overall risks while increasing the chance of better returns.

Risk 4 - Moderate to Adventurous

You are prepared to take a medium degree of risk with your investments in return for the prospect of improving longer term performance. Short term capital protection is not important to you and you are willing to sacrifice some long-term protection for the likelihood of greater returns.

A typical Balanced to Moderate to Adventurous investor will be invested in equities but with other assets included to provide some diversification. There may be a small amount of specialised equities within the portfolio, which focus on a particular sector of the economy or relate to a particular market or industry.

Specialised equities can boost longer term returns but are associated with more risk than standard type equities.

Risk 5 - Adventurous

You are prepared to take a substantial degree of risk with your investments in return for the prospect of the highest possible longer-term performance. You appreciate that over some periods of time there can be significant falls, as well as rises, in the value of your investments and you may get back less than you invest. This strategy holds significant risk in the shorter term.

A typical Adventurous investor will usually be invested entirely in higher risk assets such as equities. There may also be a proportion of the investment in specialised equities, which focus on a particular sector of the economy or relate to a particular market or industry.

Specialised equities can boost longer term returns but are associated with more risk than standard type equities.