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Assessment of risk is vital in developing any investment, saving and protection strategy. As a general rule of thumb, the higher the projected return, the higher the potential risk, and the lower the risk, the lower the potential for reward.

• Your attitude to risk may well be formed by your attitude to the following:

  1. Inflation - are you optimistic or pessimistic about inflation in the medium to long term?

  2. Interest rates
     - what will happen in the medium to longer term
     - what is happening in Europe, America, Japan?

  3. Market risks - are market rates realistic, what's happening to business activity?

  4. Exchange Rate risk - is there a foreign dimension to the investment?

  5. Political risk - is an impending general election affecting performance?

  6. Investment timescale - a shorter timescale tends to increase the risk.

• These background questions are by no means comprehensive - but provide food for thought!

• The following list is not comprehensive, but merely a guide for ease of reference. Clearly, the categories are also dependent upon the size of the portfolio. Larger portfolios have increased scope for diversification which decreases the risk profile of individual categories of investment . The list is risk based, so additional thought should be given to the tax and inflation implications.

  NIL-LOW RISK

  

  British government stocks
  Local authority stocks
  If held to maturity
  Deep discount bonds
  Corporate bonds
  
  Bank and building society deposits
  Premium Bonds
  Annuities
  Treasury Bills

  LOW-MEDIUM RISKS

  

  British government stocks
  Local authority stocks
  If not held to maturity
  Deep discount bonds
  Corporate bonds
  Some unit trusts
  Some investment trusts
  Some PEPs (managed)
  Some insurance bonds

  MEDIUM-HIGH RISK

  Ordinary UK shares (equities)
  Overseas securities
  Foreign currency accounts
  Offshore funds
  Land and property
  Some PEPs (self managed)
  Some insurance bonds
  Some unit trusts
  Some investment trusts

  HIGH RISK INVESTMENTS

  

  Commodities
  Eurobonds
  Futures
  Gems
  Precious metals
  Penny Shares
  Options
  Racehorses
  
  Click here for a calculator to assess YOUR attitude to risk

REMEMBER You should not use any information contained on this page as the basis of any action until you have discussed matters with your financial adviser.