Asset allocation and risk profile

A Financial Services Partners Adviser can recommend an investment strategy/asset allocation after they review your investment risk profile. This is an important step in developing your financial plan, in order to meet your goals and objectives.

What is asset allocation?

An asset allocation is the way in which your investment portfolio is spread across different asset classes, such as shares, property, fixed interest or cash. The process of determining which mix of assets are within your portfolio should reflect your risk profile.

What is an investment risk profile?

When deciding on an investment strategy/asset allocation, it is important to understand the expected investment risk and likely returns. You should also determine how this fits with your personal situation and financial goals.

Investments are expected to provide a return. But this return will also come with a certain level of risk. Risk means different things to different people. Typically, it is referred to as the uncertainty of the return or 'the risk of losing your capital'.

Your risk profile is essentially a measure of how comfortable you are with:

  • the possibility of losing money (or negative returns)
  • experiencing returns on your investments that may vary widely from year to year (volatility of capital and returns), and/or
  • the possibility that you may not achieve the investment returns needed to meet your financial objectives.

Investors have different attitudes towards risk. Understanding your risk profile will help you and your adviser choose an appropriate asset allocation.

There are several important factors to consider in determining your risk profile. These include:

  • your risk tolerance - how willing you are to accept the possibility of a negative return at any time in exchange for potentially higher long-term returns
  • your investment experience and understanding of financial markets
  • your investment goals and objectives - the reason you are investing
  • your investment timeframe - when you will need to access your investment capital.

Your age and the stability of your income can also be a factor.

Who is this suitable for?

This information is relevant to a person who:

  • holds any investment
  • is considering switching investments, or
  • is considering making a new investment.

Your Financial Services Partners Adviser can recommend an asset allocation after they review your risk profile. They can also determine which investments can be used to create your portfolio after they consider your needs and objectives.

Talk to us about how asset allocation might work for you

If you are ready to discover your risk profile, we can match you with a suitable Financial Services Partners Adviser who will be happy to begin working with you to create a financial plan that's right for you.

To get started, please use our adviser matching service.

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