Balancing risk – It might seem sensible to always choose a low-risk investment, but this could leave you too much or without enough money for your needs, especially in the long term. Over-confidence could encourage you to take too much risk – a high-risk investment too little? may have performed well in the past, but that’s no guarantee of future growth. The problem with not taking Balancing the risk enough risk If you’re too cautious with your investment, you may not grow Volatility Timescale your money as much as you’d like to. For example, if you’re investing over the long term for your retirement, but choose Perception Capital growth a low-risk investment, you may not have enough to live on when you come to retire. Tolerance Regular income In the UK people will, on average, need an income to support Risk Your investment themselves for 20 to 30 years after retirement at aged 65. objectives To ensure you have enough to meet your needs, you may choose a higher risk investment early on and then switch to a lower risk investment with a regular income on retirement. The problem with taking too much risk Being too confident and taking too much risk could also leave So although a high-risk investment may grow your money you without enough money for your needs. If you choose a over the long term because you can ‘ride out’ the short- high-risk investment that has performed well in the past, you term dips, putting your money into a volatile investment for may have high expectations of its future performance. But as a short time may leave you with very little growth or less than past growth is no guarantee of future growth, you may not you originally invested. make as much as you expect, which is particularly problematic if you need a certain amount of money to pay off your mortgage or to live on during your retirement, for example. Taking too much risk in the short term could also prove problematic. High-risk investments may be volatile, which means they can fluctuate quite a lot year on year. 5