Mountains

Risk Scale

The scale is designed to be indicative, providing illustrative examples of assets that Margetts consider appropriate to each category in order that advisers can compare the Margetts scale with their own internal scale of risk.

Risk is always changing and certain assets can become more or less risky over time, therefore regular portfolio reviews should be conducted to ensure that the correct risk exposure is maintained. The scale reflects different assets within a diversified portfolio. Without diversification the risk profile of a single asset is significantly higher.

 

The following is intended as a guide only and does not convey that only the assets listed will be held within the designated risk rating. The guide does not provide investment advice and investors should not use this guide to ascertain suitability of investments without discussing their requirements, objectives and financial situation with a professional adviser.

1992-02-01
2016-12-31
Risk Category Investment Std Deviation Average Drawdown Value At Risk Max Drawdown Max Losing Streak (Months) Worst Month Liquidity*
1 IA OE Money Market 0.6 -0.03 0.18 -0.53 2 -0.44  
2 FTSE Gilts All Stocks TR GBP 5.64 -3.05 3.13 -10.64 5 -4.53  
IA OE Mixed Investment 0-35% Shares 6.17 -3.46 3.52 -16.67 17 -6.74  
3 IA OE £ Strategic Bond 5.27 -2.86 2.94 -20.22 25 -7.79  
IA OE £ Corporate Bond 5.45 -3.26 3.1 -16.67 28 -5.15  
IA OE UK Gilts 6.19 -3.78 3.61 -12.39 9 -5.89  
IA OE Global Bonds 6.39 -3.51 3.77 -12.71 10 -4.14  
IA OE Mixed Investment 20-60% Shares 7.74 -4.94 4.53 -21.64 21 -8.37  
4 IA OE £ High Yield 7.56 -4.28 4.33 -27.17 18 -15.82  
IA OE UK Index Linked Gilts 7.72 -3.81 4.44 -12.83 3 -6.36  
IA OE UK Equity & Bond Income 9.97 -6.55 5.85 -31.5 22 -9.67  
IA OE Mixed Investment 40-85% Shares 10.89 -7.8 6.49 -35.64 29 -11.34  
IA OE UK Equity Income 12.98 -8.82 7.65 -41.61 22 -12.98  
5 FTSE 100 TR GBP 13.81 -9.64 8.21 -44.41 37 -12.86  
IA OE UK All Companies 13.96 -10.1 8.3 -43.26 29 -15.09  
FTSE 350 High Yield TR GBP 14.19 -9.41 8.31 -41.57 16 -12.99  
6 IA OE Global 14.28 -10.31 8.53 -49.77 29 -12.91  
IA OE North America 15.84 -10.8 9.35 -53.55 29 -12.38  
FTSE 250 TR GBP 16.4 -11.02 9.49 -47.44 21 -20.09  
7 IA OE Property 9.13 -6.49 5.35 -49.91 22 -12.83  
IA OE UK Smaller Companies 16.52 -12.04 9.66 -53.31 37 -19.41  
FTSE Small Cap PR GBP 16.92 -13.15 10.28 -59.13 21 -20.13  
IA OE Europe Excluding UK 17.22 -11.42 10.15 -50.31 30 -16.79  
FTSE World Eur Ex UK PR GBP 17.83 -12.43 10.74 -51.81 25 -16.91  
IA OE North American Smaller Companies 19.71 -13.57 11.51 -56.26 29 -16.83  
8 IA OE Asia Pacific Including Japan 18.39 -13.7 11 -50.7 28 -20.35  
IA OE Japan 18.87 -16.36 11.6 -61.1 40 -14.06  
FTSE Japan PR JPY 18.98 -16.78 11.8 -60.26 106 -15.85  
IA OE European Smaller Companies 19.41 -12.72 11.29 -62.76 36 -19.91  
IA OE Asia Pacific Excluding Japan 21.89 -15.88 12.93 -58.12 56 -25.74  
IA OE Japanese Smaller Companies 21.98 -18.16 13.26 -63.27 51 -14.68  
IA OE Global Emerging Markets 22.09 -16.89 13.11 -54.73 55 -31.07  
MSCI EM GR USD 22.94 -17.69 13.57 -57.99 48 -30.55  
MSCI AC Asia Ex Japan GR USD 23.96 -17.21 14.17 -68.68 56 -25.08  
9 IA OE Technology & Telecommunications 23.57 -15.36 13.85 -85.59 31 -22.26  

Source: Morningstar Direct. Performance based on total return with income reinvested.

Past performance may not be a reliable guide to future performance. Investments can fall as well as rise and investors may get back less than they originally invested.


Definitions

Std Dev - Standard Deviation measures volatility. High standard deviation means that the predicted range of performance is wider, implying greater volatility.

If an asset's returns follow a normal distribution, then approximately 68 percent of the time the return will fall within one standard deviation of the mean average return for that asset and 95 percent of the time within two standard deviations.

Standard deviation uses the trailing monthly total returns for the appropriate time period. All of the monthly standard deviations are then annualized.

Worst Month - This is the lowest monthly return of the investment since its inception or for as long as Morningstar has data available.

Average Drawdown - Average Drawdown is the average of yearly Maximum Drawdown measures.

Max Drawdown - The largest peak to trough decline for that asset.

Length of Max Drawdown (months) - The length of time measured in months for the worst peak to trough performance.

Value at Risk - Provides the predicted maximum monthly loss with a 95% confidence level.

Example: For every £1000 invested with a VAR of 6%, then in 95% of months losses should not exceed £60. Alternatively, there is a 5% chance that losses will be greater than the VaR figure (6%).