This information is provided for information only and must not be considered as investment advice. You should seek professional investment advice before making any investment decision.
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.
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.
Average Drawdown is the average of yearly Maximum Drawdown measures.
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%).
The largest peak to trough decline for that asset.
This is the lowest monthly return of the investment since its inception or for as long as Morningstar has data available.
The length of time measured in months for the worst peak to trough performance.