Too many DIY investors are running high-risk portfolios

26th February 2015

With the ISA deadline fast approaching, investors are looking closely at where they should put their money but Wealth Horizon has warned that too many DIY investors are taking on far too much risk.

Research from the wealth manager, has found many individuals are investing in popular funds, which are not necessarily appropriate for them.

It found that the vast majority, at 69%, of UK investors are only willing to lose a maximum of between 6% and 11% of their initial investment, with just a quarter prepared to risk a larger loss in exchange for the potential to make more gains

But a loss of between 6% and 11% is far lower than those, which have been incurred by many of the most popular funds during the last decade.

For example, during the credit crisis, some of the biggest funds in the UK experienced losses of more than 50% in a single month. Even in less severe times, losses above 11% are common for some of the largest funds investors are exposed to.

Chris Williams, CEO of Wealth Horizon, said: “Our research shows just how at odds investors’ acceptance of risk is compared to how much risk they actually take.

“With the average investor willing to lose a maximum of 11% of their investment, it means many going it alone are actually taking far greater risks than they want to with their portfolios.”

Williams urged that a balanced portfolio with a much wider range of holdings can help investors mitigate these downside risks and still generate attractive returns well above cash, without putting all their eggs in one basket.

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