How do we view risk? A Look at Our Changing Attitude to Investment
26.03.2019 by Jim Ker
Few things in life are completely risk-free: jetting off on holiday, making a big career move or purchasing a new car are just three scenarios that can present underlying issues.
Saving and investing, specifically, can involve a variety of risks, but by striking a balance between such challenges as inflation or a rise in fall in share prices, you have a much better chance of managing them.
In the first instance, consider your attitude to risk, before mapping out your investment goals and your personal circumstances: for example, your capacity for loss. Looking to weigh up the risk factors to make more of your new ISA allowance? We’ve collected a number of factors for you to consider.
To help us better understand our own views on risk – and the attitudes of others – the Financial Conduct Authority (FCA) has compiled a survey which delves into the financial lives of UK adults and how we view and adapt to risk. Here’s what we found:
Confidence is Key
One of the most enlightening findings of the survey is this: almost a quarter (24%) of UK adults have little or no confidence in managing their money, with 46% of UK adults reporting low knowledge in financial matters. Furthermore, while 50% of UK consumers “currently show one or more characteristics of potential [financial] vulnerability”, it is worth noting that ‘potential vulnerability’ does not mean that all people with these characteristics will suffer harm.
A Taboo Word
Indeed, ‘risk’ is seen as something of a taboo; we spot the word and tend to steer well clear. Yet people can assess and manage risk by simply educating themselves further on the products that interest them. It’s worth noting that any kind of investment comes with risk, but the degree as to how much is, and will always be, variable.
According to the FCA survey, 50% of the population in the UK shows characteristics of vulnerability, but this is owing to low financial resilience (30%), the experience of one or more recent life events (19%), low financial capability (17%), and relevant health issues affecting day-to-day activity (5%).
Planning for the Future
Of the population, 40% have confidence in the UK financial services industry. Meanwhile, the survey suggests that protection is in place for those who are vulnerable. “There is a careful balancing act to be achieved that involves the FCA, financial services firms and wider stakeholders to ensure that consumers, when they are vulnerable, are helped, protected and served better, and able to participate in mainstream markets,” it states.
How does your view on risk affect your saving and investment decisions? Get in touch and let us know.