Risk and reward.
Understanding the relationship between risk and reward is a fundamental part of building an investment philosophy.
Investments such as equities, bonds, property, cash/deposits and alternatives all have their own risk characteristics. Understanding how each asset class works is a key part of understanding how a diversified portfolio can help protect and grow your wealth over the medium to longer term.
All investments carry some form of risk. For example, when you choose to move your money away from a deposit account (that may be protected by the Irish State Deposit Guarantee Scheme or An Post), you are opening up the risk of;
- Your investment not keeping pace with inflation -this is where the cost of living grows at a faster rate than the interest or growth on your investment. The value of your investment falls in ‘real terms’.
- Losing some or all of your initial capital – buying individual shares, individual bonds or investing into leveraged property investments. Understanding that your investment may be exposed to counter-party risk (strength of provider), market risk, currency risk and interest rate risks.
- Investment not meeting your target level of return or expected returns – your investment goal may be to create a ‘sinking fund’ for education costs or a fund large enough to support an required level of retirement income. If your investment returns are not delivered upon then there will be a short fall. Expectations and understanding the different risk levels of investment are vital.
- Charges, fees and commissions payable – over the longer term higher charges can have a big impact on the returns that you receive.
- Taxes payable – by using different investment structures you can reduce the tax payable or defer tax payable on your investments.
How can we help you make your financial goals more achievable?
Investors can control the amount of risk your portfolio is exposed to by selecting diversified investment funds. This risk selection allows you to more accurately predict potential landing points for your investment and retirement accounts.
At Nelson Life we will take time to discuss the following;
- Your key financial goals and how much you will need.
- Time frame you have to meet the goal.
- How much you are prepared to commit to meet this goal – surpluses available to invest.
- Rates of return required and inflation adjusted returns.
- Your risk preference.
- Your capacity to loss.
- Increasing your knowledge and awareness of what is available to increase transparency on taxes, charges, commissions and fees.
What next ?
Please give us a call and we can discuss.
If you have a financial planning or product question please contact us :
This article was written by Rory Nelson, founder of Nelson Life. Rory is celebrating 20 years in financial planning this year. Professional qualifications include; UCD Specialist Diploma in Wealth Management, Pension Trustee Practitioner PTP, UCD Professional Certificate in Stockbroking,UCD Professional Certificate in Asset Management (SIA), QFA FLIA, Pensions Diploma, Mortgage Advice Diploma, CFP module – Tax & Estate Planning and has a degree in BA Accounting & Finance. He has regularly participated in national financial press.
Know more. 091 44 11 88 or email@example.com
LIFE INSURANCE | INVESTMENTS | PENSIONS | FINANCIAL PLANNING.
Nelson Life is regulated by the Central Bank of Ireland.
We are Trusted Financial Advisors and now have access to 20 products providers (we are NOT tied to one provider).
- WARNING: Past performance is not a reliable guide to future performance.
- WARNING: The value of your investment may go down as well as up.
- WARNING: You may lose some or all of the money you invest.
- WARNING: These funds may be affected by changes in currency exchange rates.
- WARNING: If you invest into this product you will not have access until you retire.
- WARNING: The above content does not constitute investment advice, as it does not take into account the investment objectives, knowledge and experience of financial situation of any particular person. Prospective investors are advised to make their own assessment of the information contained herein and to obtain professional advice suitable to their own individual circumstances.
- WARNING: The information contained in this document is based on our understanding of current tax legislation and the current Revenue Commissioners interpretation thereof and is subject to change including retrospectively without notice. This is intended as a general guide only and is not a substitute for professional tax, legal and investment advice.
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