How much risk should you take?

All investments have some degree of risk.

Generally, higher risk investments fluctuate more, and more suddenly, in value - and this can give you greater potential to grow your money. Of course, this also means you have more potential to lose money.

Lower risk investments may fluctuate in value to a lesser degree, which can mean you have less opportunity to grow your money. On the other hand, you're less likely to lose money.

The amount of investment risk you're comfortable with depends on a couple of things:

  1. Your circumstances - how much risk you can take
  2. Your feelings - how you feel about investment risk

1. Your circumstances

You should consider how much risk you're able to take with your investments - keeping in mind your other financial commitments and personal circumstances. When thinking about how much risk you're able to take you should consider how long you have until you retire and how much you need to save.

With pensions, your money is normally invested over a long period of time. So it helps to take a long term view when deciding how much investment risk you're comfortable with.

If you're a long way off, you may be comfortable taking more risk. This gives you the opportunity to grow your investments more, while still having time to make back any money they may lose.

But as you get closer to retirement, you might want to consider starting to move into funds designed to prepare your pension savings for how you plan to take your retirement income or into lower risk funds.

If you have other savings and investments, or have reached your pension savings target, you might not be aiming for high growth. Therefore, you may want to take less risk with the money you’ve built up in your pension.

2. How you feel about investment risk

Acknowledging how you feel about investment risk is important. There are no rights or wrongs, because the "right" funds to be in are the ones that you feel most comfortable with, or the ones that suit your particular situation. Remember, how you feel about investment risk can change throughout your life, especially if your circumstances change, so you should check your attitude to risk from time to time.

If you're not sure, this tool will help you determine your attitude to risk.

Question 1 of 10

My friends would say that I am cautious.


Investment risk appetite

Medium Risk


The questionnaire will help decide your investment style but it is important to understand that there are some limitations.

Understanding the limits of the risk test:

  • Education, not advice - this tool is a guide for illustrative purposes only
  • Limits - this tool doesn't look at other factors, such as your stage of life, your financial goals or the size of financial loss you are able to withstand
  • Think bigger - risk is just one of the things you need to consider when you're making investment decisions. For example, the term of your investment and whether you might want to access your investments before the end of this term are also important
  • Talk to an expert - you always have the option to consider getting professional advice before taking action

Remember, the value of your investment can go down as well as up, and may be worth less than what was paid in.