How risky are my investments?
- Nic Round: Chartered Wealth Manager
- Feb 13
- 3 min read
Updated: 1 day ago
How risky are my investments?
In the UK, investment risk is not a single number. It depends on what you hold, how long you plan to invest, how much volatility you can tolerate, and what the money is intended to support.
Behind this question are often deeper concerns:
Could I lose a significant portion of my wealth?
Am I taking more risk than I realise?
Does my portfolio match my tolerance?
What would happen in a severe market downturn?
Understanding risk properly often reduces unnecessary anxiety.
What “risk” actually means
Investment risk can mean different things:
Short-term volatility (prices rising and falling)
Permanent loss of capital
Inflation eroding spending power
Running out of money later in life
Many people focus only on volatility.
But volatility is not the same as permanent loss.
A well-diversified portfolio may fall temporarily in value without being fundamentally broken.
The role of asset allocation
The level of risk in your investments largely depends on how they are allocated.
For example:
A portfolio invested 90% in global equities will generally experience larger fluctuations.
A portfolio invested 40% in equities and 60% in bonds will usually move less sharply.
The higher the equity allocation, the greater the expected long-term growth potential — and the greater the short-term volatility.
Risk and return are connected.
A simple example
Imagine two portfolios, each worth £500,000.
Portfolio A:80% equities, 20% bonds
Portfolio B:40% equities, 60% bonds
If equity markets fall 25% and bonds fall 5%:
Portfolio A may fall by around £95,000.Portfolio B may fall by around £60,000.
Both are uncomfortable.But the experience feels very different.
The structure determines the volatility.
Time horizon matters
Risk feels very different depending on when the money is needed.
If you are:
20 years from retirement
Adding to investments regularly
Short-term falls may be manageable.
If you are:
Retiring next year
About to draw income
The same fall may feel destabilising.
Risk is not only about assets.It is about timing.
Capacity for loss vs attitude to risk
Two key concepts often shape investment suitability:
Capacity for lossHow much could your investments fall without affecting your lifestyle?
Attitude to riskHow comfortable are you emotionally with volatility?
You may be comfortable with risk psychologically, but unable to afford large losses financially.
Or vice versa.
Understanding both dimensions is essential.
The behavioural layer
Often the question “How risky are my investments?” arises after:
A market downturn
Reading financial news
Seeing large swings in portfolio value
Risk becomes more visible during stress.
But reacting purely to recent movements can lead to structural mistakes.
The more useful question is whether the current structure was chosen deliberately — or drifted over time.
A more useful question
Rather than asking only:
How risky are my investments?
A more grounded question might be:
Could I tolerate a significant fall in value without changing my long-term plan?
If the honest answer is no, the issue may be alignment rather than markets.
Some of the most common practical questions people ask about investment risk are below.
How do I measure the risk of my investments?
Risk can be assessed through asset allocation, volatility history, diversification and potential downside scenarios.
Are shares always high risk?
Shares are more volatile than bonds or cash, but over long periods they have historically delivered higher growth.
Is a balanced portfolio low risk?
A balanced portfolio reduces volatility compared to full equity exposure, but still carries market risk.
Should I reduce risk as I get older?
Risk often needs to reflect time horizon and income needs, particularly as retirement approaches.
A calm place to think first
If you are unsure whether your investments are too risky, there is rarely a need for immediate change.
Often the first step is to clarify:
What your portfolio is designed to achieve
When you will need the money
Whether volatility feels tolerable in real terms
Evoa exists to provide that quiet thinking space — before advice, before action.
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