Cork investment firm asks public what they think of risk

22 November 2015
By Bryan Smyth
bryan@TheCork.ie

Are you more likely to back a sure thing versus taking a chance?
Are you willing to take a gamble?

A recent consumer survey carried out by independent financial advisory firm, City Life Wealth Advisors assessed attitudes to risk when it comes to money and investments.

The word “risk” has different connotations for people, with almost two thirds of people saying that uncertainty is the first word that comes to mind when they hear “risk”. 33% of respondents associate risk with opportunity or thrill; while 6% say that loss is the first word that comes to mind – have these people lost out in the past after taking risks?

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Despite some negative associations respondents appear to like a little risk in their lives, once it’s measured. When asked how their best friend would describe them when it comes to risk taking, 53% said they would be willing to take risks after completing adequate research, while 38% said they would be described as cautious. 16 respondents said they could be described as a real gambler, while on the other end of the scale, just two people said they are real risk avoiders – no flutter on the lotto for them then!

People often imagine what choice they would make if they appeared on a TV game show where they have the opportunity to win big money, with half of the audience shouting “gamble, gamble” and the other half screaming “stick”. The survey looked into this and found that cold hard cash is certainly tempting, with just over one tenth of respondents saying they would play it safe and take a guaranteed €1,000; while 55% said they would go with a 50% chance of winning €5,000. 17% said they would go with a 25% chance of winning €10,000; with 16% saying they would gamble and take the 5% chance of winning a life changing amount of €100,000.

On the other hand when smaller sums of cash are at stake, the survey found that the majority of people feel that a bird in the hand is worth two in the bush, with 60% of respondents choosing a sure gain of €500 over a 50% chance to gain €1,000 and a 50% chance to gain nothing.

When it comes to investing money however, security seems to be a top priority, with 63% of people saying that if they unexpectedly received €20,000 to invest, they would invest in An Post or Government Bonds, or deposit it in a bank account; and 37% saying they would invest in a mix of shares and property. Just one “brave” soul said they would invest it in shares alone. Investing in shares appears to be an area that people just aren’t that sure about, with 9 in 10 survey respondents saying they aren’t very comfortable with it, and almost half of these saying they aren’t comfortable at all.

Eamon Dwyer, Managing Director of City Life Wealth Advisors, who commissioned the survey explained

“It’s apparent that people understand that investing in growth assets like shares over long periods of time usually produces better returns than investing in cash or bonds. However, alongside these higher returns, investing in shares usually brings higher risk and the possibility that returns can vary considerably each year and that’s why some are more cautious than others.”

Does heart lead over head at times when it comes to planning ahead? People were asked what would they do if, three weeks before going on a “once-in-a-lifetime” holiday, after saving for months, they lost their job. Almost 70% said they would go as planned, reasoning that they need the time to prepare for their next job hunt – of course they do! Out of the more “sensible” folks, 12% said they would be frugal and take a much more modest holiday, with a similar number saying they would cancel it altogether. The remainder said “what the heck!” and would extend their holiday because this might be their last chance to go for a while.

The survey ranked respondents answers and found that 56% have an average/ moderate tolerance for risk, 22% have an above average tolerance, 17% have a slightly lower than average tolerance for risk with 3.5% having a low tolerance.

City Life carried out the survey on the back of their recent introduction of a suite of Skyline Portfolios which have been designed by using a combination of funds – each portfolio invests in a mix of cash, bonds, equities, property and alternative assets, and each has been developed to suit different attitudes to risk. These range from the low risk, Skyline Cautious Portfolio, which has a relatively large percentage invested in cash and bonds, to the higher risk, Skyline Adventurous Portfolio, which is predominantly invested in shares.

Eamon concluded

“While we fully expect the Skyline Adventurous Portfolio to give a better return than the Skyline Cautious Portfolio over longer time horizons, we would also expect the returns on the Adventurous Portfolio to vary to a much greater extent than those in the Cautious Portfolio. Based on the findings of our recent survey the latter will probably appeal to plenty of people as the turmoil of the global financial crisis is still fresh in some people’s minds. It’s nice to have strong offering for lower risk investors right now.”

For further information on investment options visit www.citylife.ie

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