What kind of investor am I?

It is important to understand what type of investor you are by considering the following: Your attitude to risk, time horizon planning, current financial position and ultimately what are you trying to achieve?

My Attitude to Risk
  1. Find investments that have an element of risk you are comfortable with.
  2. Set your expectations when planning for your goals, Lower risk can mean lower returns.
  3. All investments on Trustnet Direct have a Risk Score to guide you.

All investments carry an element of risk – even cash suffers from a real loss of value due to the effects of inflation. Naturally, North Korean mining exploration companies will carry more risk than AAA rated Government bonds or gilts.

Potential worth

You need to think hard about what level of risk you are happy to expose your hard earned money to. After all, no amount of potential gain is worth months of sleepless nights at the thought of losing your investment capital.

Put risk into context

The greater risk you are prepared to take, the greater the potential returns and conversely the less risk you take, the likelihood is that your returns will be less too.

Risk score

Trustnet Direct rates all its investments with its own risk score (and we’ll usually provide a comparative benchmark too).

A score of 0 is the equivalent of cash, the FTSE100 index is 100 on our scale, so any risk score higher than this will indicate that the investment is riskier than the index of Britain’s 100 largest public companies (Vodafone, Lloyds Bank, BP, etc.).

The FTSE 100 index represents
Britain’s 100 largest
public companies.
Its risk score is 100.


My Time Horizon
  1. When planning, think about when you might need access to your investments in an emergency.
  2. Are your goals realistic? If you need to create a large investment pool, start investing early.
  3. Pay off debt before making stock market investments.
“For children or
it’s never too early
to start investing”


Understanding how long you want you to keep your money invested is important as stock market investing is a longer-term activity and the value of your investments can fluctuate significantly.

Plan ahead

Most professional advisers would suggest a minimum investment period of 10 years, which is a long enough period to ‘iron out’ the typical peaks and troughs of the stock market. Yes, you can be lucky and invest for shorter periods where you ride a period of strong growth, but these periods are only really visible with hindsight. It is just as easy to find yourself investing during a down-cycle and selling up for less than you originally invested. Over time, these peaks and troughs even out and you have the potential for long-term growth. It is worth planning far ahead, so here are some tips:

Long-term objectives

It is never too early to start investing in a pension. Sure, you may not have much disposable cash when you’re young, but the discipline of putting money into a tax efficient Self Invested Personal Pension (SIPP) for example, could produce a significant pool of money at retirement. The later you start the more you’ll need to invest for the same end benefit.

Long Term Commitments

Do you have a mortgage or other capital expenditure such as saving for a wedding, car, second home or education fees, then they need thoughtful planning. Eradicating long-term loans such as a mortgage or avoiding future debt scenarios can be helped by building a ‘goal-specific’ investment portfolio.

Around the birth of your children (or grandchildren) is a good time to start investing for school and even university fees. Finding large sums of money for these fees out of monthly cash flow can be pretty tough, so having an investment fund to draw on will help ease the pain.

Debt is bad

Borrowing money is usually pretty expensive, so saving up a pool of cash means you can buy things for cash without the need for a mortgage or loan. In emergencies, you never know when having access to a healthy investment portfolio will come in useful.

Capacity for Loss

It is important to understand where you are in the investment life cycle, as your capacity for loss will change as you approach retirement. When you’re younger, you can absorb relative drops in your investments on the basis that there is plenty of time to recover from a stock market fall. But if you happen to hit a stock market crash immediately pre-retirement, then you could be in big trouble.

In most cases, it is wiser to gradually decrease your exposure to equity markets and its inherent volatility as you draw nearer to retirement, or a particular investment goal.

My Financial Position
  1. Pay off outstanding debt before making stock market investments.
  2. Consider investing each month to build an investment portfolio over time.
  3. What investment phase are you in – capital accumulation, consolidation or harvesting?

Given the fact that the UK population has recently binged on debt, a more sober savings culture is beginning to take over.

Be honest with yourself

Carefully consider your financial position before you think of investing.
If you are still carrying debt, it is much better to pay that off before the lure of investing tempts you otherwise. If you have high overheads or a volatile cash flow, can you afford to make consistent regular investments? If you are investing, can you access the money in case of an emergency (without necessarily tying it up in the stock market, or in a pension)?

If the worst happens

Can you afford to lose some or potentially even all of the money you have invested?
Think carefully if your appetite for risk outweighs the concerns you have about protecting your money.

Wise, rewarding & enjoyable

It’s daft investing in funds and shares if you’re running up credit card bills with 20%+ interest rates. If you have spare cash, either monthly or a lump sum, then investing it can be wise, rewarding and enjoyable. With low interest rates at present, the stock market can protect your cash from inflation and grow your capital over the longer-term.

Life cycle position

Finally, it is worth understanding where you are in the life-cycle. Younger people can afford to take a little more risk in the ‘capital accumulation phase’ of their investing lives, those approaching retirement should be in a ‘capital preservation & consolidation phase’ and once retired you may find yourself in the ‘capital harvesting or income phase’ of your life. Again, all generic rules-of-thumb and individual circumstances will vary enormously.

Where are you in
the life cycle?


My Goals
  1. Set realistic goals and try to invest the right amount of money to achieve them.
  2. Try to pick investments that won’t keep you awake at night about how they’re performing.
  3. Plan ahead – everything is far more achievable if you start early.
Set realistic goals,
plan ahead &
grow your wealth


What are you trying to achieve? Think hard about what you are investing for.


On this site, we have tried to be more goal or objective based to help you select the right kind of investments for the job. But again, be honest with yourself. If you thought that investing £100 per month for three years will buy you a new luxury yacht, think again.

Plan ahead

The investment industry has adopted three growth rates by which we can assume growth levels and they are 5%, 7% and 9% (dependent on your level of risk). The key mantra is plan ahead for the longer-term.

In 10 years' time?

Look at what you might need in 10 years (education fees, second home, capital purchase, emergency fund, classic cars, etc.) and again at where you’ll be in 20 years (retirement, settling a mortgage, helping out your children, etc.).

Preserve your wealth

If you just want an efficient home for your money, then currently fund and stock market investing is attractive in a low interest rate world. The use of a tax efficient ISA or SIPP can further preserve your wealth, generate an income or grow your capital.


Find the right investments for you with our
unique resources and tools.

Once you have decided, open an account with Trustnet Direct and our interactive portfolio will help you keep track of all your investments.

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