What do your risk levels mean?28 April 2015 Back to results
To help our investors decide which funds might be suitable for them, we divide them into the following six risk categories:
These funds have underlying investments that typically see little change in value from day to day.(Expand content) (Minimise content)
The fund price movements will generally be positive but could be negative, particularly in a low interest rate environment. They are particularly suited to short-term investment where stability is the main aim. Over the long term, they are unlikely to deliver high levels of return and their returns may not keep pace with inflation.
These funds will typically experience small changes in day-to-day value, both positive and negative.(Expand content) (Minimise content)
They may keep risk down in a variety of ways, for example by holding a very broad range of investments or they may contain a narrower range of investments, but which have a short term to maturity. Over the long term they are unlikely to deliver high levels of return and may not keep pace with inflation.
These funds will generally see some change in day-to-day value, both positive and negative, and these will be larger in size than movements for a typical cash deposit.(Expand content) (Minimise content)
They may hold a broad range of investment types, including equities (shares), but a significant proportion will be invested in investments that aim to provide a reliable source of income and, with that, greater stability. They try to provide better long-term growth prospects than a cash deposit, but are lower risk than funds investing entirely in equities.
These funds invest in a broad range of investment types and will typically hold a significant proportion in equities.(Expand content) (Minimise content)
Their daily price movements will therefore vary from day to day, both up and down, although not usually as much as for funds investing entirely in equities. These movements can lead to lengthy periods of negative returns. However, over the longer term these funds would be expected to deliver significantly better growth prospects than a cash deposit.
Most funds in this category invest in one investment type or geographical region, for example North American equities or global bonds.(Expand content) (Minimise content)
This means that investors are completely exposed to the performance of that single investment type or region. Where, for example, the stockmarket for a particular investment type or region falls for whatever reason, it as very likely that any shares held in that type or region will also fall in value. These funds could experience lengthy periods of negative returns. By the same token, these funds can also rise in value quite significantly and can provide very good long-term growth in the right market conditions. Because of their narrow investment focus, they are better suited to investors with at least five years to invest and to use in combination with other funds that invest in different investment types and regions.
These funds invest in regions and investment types that typically see large day-to-day changes in value, both negative and positive.(Expand content) (Minimise content)
Again, they tend to invest in a single investment type or geographical region and these investment types (for example gold) and regions (for example emerging markets) have historically been more volatile (risky) than those in the Above-average risk a category. These funds have historically provided periods of high returns but, because of their narrow investment focus, they are better suited to long-term investment and being used in combination with other funds that invest in different investment types and regions.