Pros and cons of being a risk averse investor (From Hartey Wealth Management Ltd. UK) [2 Articles]
~ Wednesday, June 28, 2023 Blog Post ~
By Hartey Wealth Management Ltd. UK, June 24, 2023
In terms of investment, exhibiting risk aversion refers to consumers who avoid securities deemed risky. As a result, individuals who are risk averse typically seek out assets and investment strategies that match their low risk tolerance. However, while less risky financially, this approach to investing can be limiting and rarely offers outstanding returns. Read on as we explain the advantages and disadvantages of risk aversion.
Slow and steady returns
The main advantage of adopting a risk averse strategy is that the chance of experiencing losses is effectively minimised. Investing funds in low-risk products such as fixed-income securities can also offer cash flows you can count on and consistent positive returns in the long term.
Lower overall returns
The downside of a low-risk approach is that it also has low expected returns. The risk-return trade-off doesn’t favour risk averse investors who shy away from riskier assets such as stocks. As a result, risk averse investors typically receive lower total returns overall, especially when looking at long-term investments.
Risk aversion as a trait, can also lead investors to avoid what can be sound opportunities. In extreme cases, they may stay away from markets entirely, which can put them at a clear disadvantage if they are saving for their retirement. Furthermore, inactive money in savings is eroded over time by inflation as it loses its buying power.
For investment advice and portfolio management in Shropshire and Chester, contact our dedicated team today at Hartey Wealth Management.
Source:
https://www.harteywm.co.uk/articles/pros-and-cons-of-being-a-risk-averse-investor/
Article #2: UK Treasury encourages investor positivity regarding risk taking (From Hartey Wealth Management Ltd. UK)
By Hartey Wealth Management Ltd. UK, June 22, 2023
According to the economic secretary to the UK Treasury, Andrew Griffith, pension funds in Britain should feel somewhat comfortable in taking some risks while investing. The City Minister’s views were heard recently in Edinburgh at the Pensions and Lifetime Savings Association (PLSA) Investment Conference 2023.
Via a message pre-recorded for attendees of the conference, Griffith stated his goal was to reform risk averse culture, commenting:
“I want us to be positive about taking risks and to celebrate successful risk takers, and also to recognise that without changes, there is risk in the system. We’re taking risks through risking low returns, poorer pensions under a weaker economy.”
He added that it was those in attendance who possessed the best understanding of challenges and risks with pension schemes and called out for them to help the government in its attempts to reshape the current aversion to risk in investment.
The economic secretary’s comments come amidst the ambitions of the UK government to encourage investments from pensions schemes into illiquid and sustainable assets, as well as UK growth generally. Following the minister’s statement, a panel session was held where pension fund heads criticised the government’s requests calling for greater levels of consistency and clarity.
Whether Britons are keen to put their funds into sustainable assets or UK infrastructure before committing to purchase, most consult financial specialists for investment advice in Shropshire, Hampshire and other affluent areas. As independent financial advisors, wealth management teams provide their clients with an impartial and expert view on potential investments.
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