Learning Material Sample

Retirement planning Demo

9. Risk & return

In this chapter we discuss the concept of risk and return and how it may effect an investor’s retirement planning strategy.

When advising clients on investment planning it is important to ensure that they are fully aware of the ri...

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...tch their attitude to risk. If they don’t, then the adviser will need to manage client expectations.
Risk to capital

This is the risk that some/all of the individual capital invested may be lost. The possibility of this risk usually increases where investments provide the potential for higher real returns.

“Non-systematic risk” is the risk of some internal or external event that can affect the performance of one company (and therefore value/earnings etc for the investor), but may not necessarily affect other institutions. A common policy to counteract this type of risk is to hold a number of different stocks, s...

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...e one (e.g. military coup) could result in the market taking a completely different view of that country’s prospects with the effects this may have on relevant assets held.

Liquidity risk

An investment may be difficult to sell eg unlisted company shares.

Settlement or counterparty risk

The counterparty to a transaction may fail to settle.

No investment will be free of any risk due to the fact that some risk will be associated with capital loss, and some with the nature or level of returns that can be gained.

Over longer terms, investors may be more prepared to invest predominantly in asset backed investments within t...

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... against falling annuity rates

The switching takes place automatically unless the planholder intervenes.

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