Your Guide to Investment Risk and Objectives

This guide is intended to explain to you what we mean at Bay Financial Partners Ltd, by investment risk. It will assist you to decide the level of risk that you are prepared to accept and identify your investment objectives.

What is Investment Risk?

Investment risk can be defined as the degree of variability in performance of an investment over time. The greater the variability or fluctuation in the performance of a particular investment, the greater its investment risk is said to be. As this performance is directly reflected in the value of an investment, poor performance will usually result in reductions in the value of investments just as good performance will usually result in increases in the value of investment capital.

As many investors are primarily concerned with the possibility of losses to their investment capital, their tolerance to this uncertainty will usually dictate their investment risk category.

Risk vs Reward

Effectively, there is a trade-off between risk and reward so that the greater the possibility that you could lose capital, the greater the return you can expect from it over the longer term*. Similarly, investments that could bring limited losses to investment capital will also only provide limited gains to the investment.

Investment Risk Categories

We have a range of defined investment risk categories which relate to terminology often used in day to day explanations and our literature. The definition of each category will help you describe your risk tolerance and go some way to assisting you decide which category would be most suitable for you.

1. Defensive

You do not want any loss in the original value of your capital, (with the exception of the effect of movement in foreign exchange rates). You fully understand and accept that over the long term, the performance of your capital is likely to be lower than investments in stocks and shares and may suffer from the effects of high inflation, but you prefer the security of cash or term deposit based savings.

2. Conservative/Low/Cautious Risk

You are prepared to see a limited downward fluctuation in the original value of your capital in return for the likely prospect of moderately higher returns in the longer term* and understand that currency movements may also affect the value of your investment.

3. Balanced /Medium Risk

You are prepared to see a greater degree of fluctuation in the value of your capital than the Conservative investor, and accept the effect exchange rate movements may have on your investment. By accepting a greater degree of uncertainty over the value of your capital than the Conservative investor, you will have the possibility of receiving a higher level of return in the longer term*.

4. Growth Risk

You require minimal income and are willing to accept high levels of volatility in return for potentially higher returns over the long term. You will be aware of the effects of currency fluctuations on the return that you receive from your investments.

5. Aggressive/Adventurous Risk

You are prepared to accept a higher degree of fluctuation in the value of your capital. For instance, you are prepared to commit a significant proportion of your capital to stocks and shares, with lower emphasis on the short-term security of deposit based savings. You may well be seeing investments which carry a higher risk/rewards profile in order to possibly obtain an even greater return on your capital. You will be aware of the effects of currency fluctuations on the return that you receive from your investments.

Investment Objectives

We have identified four possible objectives:

1. Income only

You are looking for a regular income from your investment. Your investment portfolio will be biased toward providing you with a high level of income from your assets.

2. Mainly income with a little growth

You are looking for a regular income from your investment. Your investment portfolio will be biased toward providing you with a high level of income from your capital whilst aiming to protectyour capital from the effects of inflation over the longer term* by incorporating some equity/growth content.

3. Some income but mainly growth

Although you may require income from your investments, you are prepared to accept a lower level of income at present than an Income investor, in exchange for a greater growth in both your income and capital over the longer term*.

4. Capital growth only

The level of income produced by your capital is not important to you, as you are concerned with the possible growth of your capital over the longer term*.

*Longer term in this context means at least seven to ten years

If you would like us to determine your Risk Profile please download print and complete the Risk Assessment Questionnaire and This email address is being protected from spambots. You need JavaScript enabled to view it., fax or post it to us. Please ensure you include your contact details so we can get back to you with the results. Click here to open the Risk Assessment Questionnaire.

Email: This email address is being protected from spambots. You need JavaScript enabled to view it., Fax: no 07 577 6198, Postal Address:

PO Box 843
Seventh Avenue
Tauranga, 3140