Think about all of the investments you currently hold, whether that is shares or your pension fund; when is the last time that you reviewed them? Investment management, including the regular review of your funds, is important for your financial future. In a nutshell, reviewing your investments should be based around your changing attitude to investment risk throughout the years.
What is investment risk?
There are numerous risks associated with investing, and that is because the market and your own circumstances are likely to change. A few types of risk are: currency risk, exchange rate risk, market risk, political risk and valuation risk. Because there are different types of investment, you will find that these risks may or not be overtly present in the investments you hold. If you are seeking to make new investments, you should first assess the overall level of risk you are taking with an expert financial adviser.
What is your approach to risk?
Your financial adviser will be able to help you to understand your own attitude to risk by carrying out a ‘risk profile’. In the past it was common for investors to be classed as either ‘cautious’, ‘balanced’ or ‘aggressive’, but now it is possible for your adviser to measure your approach to risk much more precisely. They now use risk profile questionnaires and online tools to find the investment strategies best suited to you and to give you a greater understanding of how your investments will behave in the future.
Key moments to review your investments
As we now know that your attitude to risk is fundamental to your investment portfolio, it makes sense to reflect this in real life situations. Below we have listed some examples of moments where you may want to review your investments and reassess your attitude to risk.
Milestone birthdays
Not many of us like the fact that we are getting older, but age can be a factor in assessing your risk level. When you are younger, you may be more susceptible to the idea of investing in a fund that potentially offers higher risk and return. As you age, you might find that you are not so sure about a high-risk portfolio and may adapt it accordingly.
Life planning
We never know exactly what is waiting for us in the future. It could be a move abroad, buying a second home or changes in the family structure. For this reason, investments that you make before these events may be perfectly tuned to your life, but they may not be as appropriate upon these changes. Your financial adviser should be able to help you decide whether you want to hold on to your investments or make amends to your strategy.
Economic shifts
Some forms of investment may be more appropriate for a slow economy whilst others are likely to be more rewarding in a more successful one. Once again, you should seek advice from your financial adviser to see whether any changes in the economy will affect your investments in a short or long term way.
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