Personal Financial Individual Risk Profile

Personal individual risk profile is having close in relation to the choice of where your savings and the decision when the best time of investment. This will provide an introduction to the more detailed examination of these subjects closely.

The technical definition of risk, in financial terms, is ‘the standard deviation of the (arithmetic) average return’. For the private investor, however, risk has a range of less technical meanings and can be very subjective. Conventional theory suggests that the two chief risks for private investors are capital loss and inflation. These are certainly very valid but a more holistic role in financial planning approach considers risk in the context of not achieving an objective. For example the annual return of a private pension fund could be measured against an index, such as the FTSE All Share, and against similar funds, but first and foremost it should be measured against the return needed to achieve the desired retirement objective.

The reward for individuals who take investment risks is the total return, which is usually expressed as a percentage increase of the original investment taking account of both the income (yield) reinvested plus any capital growth (the rise in the market price). This may seem an obvious point but some of the more recent financial scandals have involved the sale of structured products that achieve the stated increase your income or growth target but where the total investment better return has been far less than the amount invested.