Choosing a fund which suits your attitude to risk
To help you find a suitable fund, we provide risk ratings for all the funds in our Platinum 120 and weekly fund in focus. The funds fall into three categories:
- Lower risk (L)
- Medium risk (M)
- Higher risk (H)
Within each category, funds are classified according to their size and the different types of investments they contain. The higher the number, the higher the risk (and potential to be more volatile):
|Our risk rating
||Type of fund
||Cash / Money
||The lowest level of risk and volatility.
||UK Gilt and Sovereign Debt
||Predominantly contains UK Government Gilts of varying maturity.
||Invests in companies which issue debt to raise capital. Underlying assets need to be considered: funds which primarily invest in ‘Investment Grade’ debt will tend to be less volatile and at less risk of company defaults compared to those which focus on ‘Non-Investment Grade’ debt.
||Invests directly in bricks and mortar or property company shares. May include overseas holdings.
Focussed on the UK, investing in
large FTSE 100 companies through to small AIM/Fledgling FTSE companies.
Must be diversified by geographic region, even where a style or theme exists e.g. a focus on an industry sector.
||Look to invest across Europe, excluding the UK.
||Focussed on North America, however investments may occasionally be outside this geographical area.
||Includes countries such as Japan, Australia and developed economies from Asia (excluding China).
||Predominantly contains investments which focus on developing and emerging economies such as BRIC (Brazil, Russia, India and China).
||Focussed on investments which are specialist or specific to an industry or physical asset e.g. Commodities or Technology (excluding property).
How we rate the funds
We use a range of news, analysis and research tools to rate funds. Our primary source is Financial Express Analytics, but we also meet regularly with the various Fund Houses. Fundamental data used includes: beta, alpha, Sharpe ratio, Treynor measure, Jensen measure, performance comparative to benchmark and sector, positive and negative periods, r2, tracking error and downside risk.
To find out more about how we arrive at our views on investments and risk, please read our investment research policy.