Discover your investor type, and ISA funds for you

Fri 10 Mar 2017

By Brian Dennehy

Access Level | public

Generating growth




This is often the hardest part.  Understanding your own risk appetite and tolerance is a key part of a successful investment plan.

It often helps to start with a blank sheet of paper.  If you are unsure of your investment risk the following statements should help guide you.  Your attitude to risk will determine the types of investment funds at the heart of your portfolio (which we look at next).

Cautious investor: 

  • I have only ever had my money in the building society or bank
  • My objective now is to achieve better returns than the building society or similar

Relaxed investor:

  • I am comfortable with stock market risk
  • I am prepared to take some risk with the capital value
  • I have invested in medium risk investments before
  • I have experienced how they can go sharply down in value

Adventurous investor:

  • I am prepared to take noticeable risk with the capital value (what we call high risk)
  • I have invested in high risk investments before
  • I have experienced how they can go very sharply down in value, very quickly
  • I will leave sufficient money on deposit to cover planned expenditure, emergencies, and to give me peace of mind

Once you have determined where you sit based on the above questions it’s time to move on to the fund sectors from which you could choose.

Your Hunting Ground

Your fund sector selection should align with your attitude to risk (nothing should feel “uncomfortable”).  Below is a guide to the fund sectors for each type of investor.

Cautious investors should consider:

  • Mixed Investment 0-35% Shares
  • Targeted Absolute Return
  • Bonds
  • Bricks and Mortar Property

Relaxed investors should consider:

  • Mixed Investment 20-60% Shares
  • Major stock markets (US, UK, Europe ex-UK and Japan)
  • UK and Global Equity Income 

Adventurous investors should consider:

  • Mixed Investment 40-85% Shares
  • Global Growth
  • Global Emerging Markets 
  • Specialist 
  • China 

Picking the funds: Simple vs. Focussed Solutions

If you want to keep it simple – or are a novice – then your hunting ground should be more limited.  You will want to select funds from fund categories or sectors where the manager has the ability to invest broadly across different asset classes, doing the legwork for you.  So, for our purposes these would be:

  • Cautious investor: Mixed Investment 0-35% Shares sector
  • Relaxed investor:  Mixed Investment 20-60% Shares sector
  • Adventurous investor:  Mixed Investment 40-85% Shares sector

The names of the sectors are horribly uninspiring.  A little explanation helps.  For example, the Mixed Investment 20-60% Shares contains funds investing between 20% and 60% in equities. 

You can see our recommendations below for each category of investor (based on our Vintage Fund Ratings), which judge a fund by the consistency of its long-term performance.

If you already have a diverse spread of funds and are looking for a focussed opportunity then we’d highlight the following funds for the different risk types:

  • Cautious: Threadneedle UK Property is a great option for accessing the commercial property sector (outside of prime central London) where we still see decent value. Slowing capital growth and Brexit worried some investors but growth in rental income should support steady returns.
  • Relaxed: Schroder Income.  This is an equity income fund, which invests in the stock market. Schroders seeks out opportunities by pursuing a Value strategy (buy what is unjustifiably cheap, wherever you find it).  The Value approach began to take off in 2016, and we expect this new trend to continue for a number of years, a boon for Value managers such as Schroders.
  • Adventurous: Jupiter India.  India’s story remains on track. This is a long-term growth story. A very young, dynamic population, reinforced by a reform-minded government.  After a quiet 2016 for this market, buy.
  • Take a moment to think about how you invest
  • Are you in comfortable in your choices?
  • Don't be afraid to start again with a blank sheet of paper


Generating growth


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