Risk tolerance

All investments are designed to make a return and are subject to risk. This means that, as well as making money, there's also a chance that you could lose it. You might also think of risk as the possibility that your investments don't achieve your financial objectives. As a general rule, the bigger the potential investment return, the higher the investment risk and the longer the suggested investment timeframe.

Before investing you need to decide how comfortable you are with investment risk and how much risk you are prepared to take to achieve the returns you want. This is often referred to as your 'risk profile'.

How comfortable would you be with short term fluctuations in the value of your investments?
Understanding how the different asset classes work can be a big help here. You don't want to lie awake worrying about your investments, so understanding your risk profile can help you get a good night's sleep.

Investing is all about making your money work harder for you now, to ensure your financial growth and security in the long term.  Whether you're a first time investor, or the holder of a blue-chip portfolio, the basic elements of investing are the same.

- Asset classes
- Asset allocation
- Managed funds
- Diversification