After a torrid year on world markets it is hardly surprising that risk is firmly back on the agenda ...
After a torrid year on world markets it is hardly surprising that risk is firmly back on the agenda as a major topic of debate. Suddenly, every fund management group that last year defined risk as falling behind the index now claims it is a stockpicker and that the worst sort of risk is being in a bad company.
The spectacular fall of growth stocks and renaissance of value has also concentrated the mind as to whether managers are value or growth. All worthwhile, but all questions investors should have been asking themselves during the bull market, not after it.
The plain fact is that not enough people looked under the bonnet before driving off in what they thought was their dream vehicle on its way to a land of wealth and opportunity.
Not every investment group had a fund with a title that truly reflected what was going on in the underlying portfolio, but if investors are going to put significant sums in the market, it is up to them to do some proper research as well.
A big lesson of the past 12 months is that investors should know exactly what they are investing in. But there is a more important lesson that many people seem to have forgotten ' investors must know for what they are investing.
Risk is an important factor but the various definitions of it are endless. Put five experts on investment risk together in a room and, rather like economists, they will come up with five different answers. Like experts everywhere, they will agree there is not a single right answer but it is always fun and fruitful to kick around all sorts of jargon and complex ideas.
The best way for investors to avoid the confusion is to focus on what they want their money to grow to, how vital it is that they don't lose it and what it is going to be used for when it is cashed in: there's no point in going for stellar rewards when your needs and risk profile are down to earth.
That leads on to the most important lesson of all: what you get out of an investment depends on what you put into it. Too many financial services adverts are effectively promising to make investors rich quick by quoting fantastic past performance numbers.
In reality, if you want to make £100,000, make sure you start out with £50,000, not £1,000. And if you want to be really sure, give yourself 10 years, not six months.
The biggest risks in investment are underfunding, ill-defined goals and unrealistic expectations.
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation