Selecting a risk strategy that best suits you is an important
part of your savings and investment strategy. The
higher your risk level, the bigger your potential gains but also
your potential losses. Taking risks over the long term is critical
to increasing investment returns and reaching your investment
Generally speaking, the longer you intend investing your money,
the more risk you are able to take. This is because both your
chance of losing money and the volatility of your returns reduces
the longer you hold an investment. Over a long period of time the
years in which your returns are poor can be offset by the years in
which the returns are very good.
This does not mean
that you cannot take a risk closer to retirement, or during
retirement for that matter. We are living longer and longer making
it necessary to take risk in order to achieve returns.
The chart below shows the typical range of possible investment
gains and losses per year by risk strategy. During our online
process, you will be asked to select a risk strategy that best
suits you. The small blocks show the expected average yearly return
per risk strategy. The vertical lines represent the likely
range of possible returns around this average every year.
We always take into account how long you intend investing for when
selecting the right investments for you. The “aggressive” risk
strategy we implement for someone in their 20s is quite different
from that of someone at or after retirement. So what we are trying
to establish is how much risk you are willing to take over a long
period of time for an expected level of reward, in the form of
You are looking to maximise returns and understand that there will
be times when your portfolio will suffer losses (sometimes
substantial losses). However, you also expect years where you will
make substantial returns to more than offset any loss making
periods. It is highly unlikely but not impossible that at the end
of your investment period you will suffer a loss.
You are looking for moderate returns and understand that you are
likely to experience losses at times, but are uncomfortable with
these being substantial (although there is still a possibility).
As with an aggressive strategy, there will be years of strong
returns but to a lesser extent.
You would rather have much lower returns that at times may not
even beat inflation because you are more concerned with minimising
your chances of making any losses. This is not a common long term
investment strategy and can seriously jeopardise your ability of
attaining your long term investment goals.
We encourage you to see what the impact of choosing different risk
strategies is on both the size of your expected level of return
and on the variability of that level of return. You will be given
an opportunity to do this as one of the steps in our online
We review your choice of risk strategy with you at least once a
year to ensure it is still relevant to your current circumstances.
Over and above this, we will gather additional information from
you as you approach retirement and adjust your investment and risk
strategy accordingly. Your investment and risk strategy leading up
to and at retirement is largely dependent on your income needs as
a percentage of your portfolio value at the time.