Risk terminology can be confusing. An investment in a conservative South Africa product, when viewed from a global perspective may in fact be “aggressive” – since it is based in an emerging market with a “soft” currency.
It’s all too easy to assume that you have a certain risk profile for investments – but a careful evaluation may surprise you.
Once you know your risk profile – you will need the risk rankings of the various investments available in order to build a sound strategy. These investment risk rankings can and do change – so you need someone to monitor them for you [unless of course you have the time and resources to do so yourself]. Some fund managers have been known to step outside their fund mandates to bolster returns and as a result alter the risk ranking of the fund. The risks they take may lead to losses instead of gains – and may expose you to risks you were not personally prepared to take.
The historical commitment of fund management companies to published risk rankings for their funds and the comparative returns they are able to generate within these risk profiles are two of the more important criteria we use in our selection process.