To risk or not to risk?
How risky are you? To find out, take the balloon test; a game of chance that explores the way risk affects your behaviour.
We can help you discover how your unique Financial Personality could be affecting your investment behaviour. Take your first step towards becoming a more successful investor.
The FPA is designed for investors with £500k+ investable assets. However, whatever the size of your portfolio, we believe there’s value in taking the test in order to uncover your hidden investment personality.
Each time you pump the balloon, you earn 50 points. But watch out — there’s no way of knowing when the balloon will burst. The object is to collect as many points before it does and you get five rounds to get the highest score you can.
As in the balloon game, the amount of risk you’re willing to take tends to be influenced by factors such as personal circumstance and age. This knowledge has been transferred to the financial world, where it’s seen as outdated to look at attitudes to risk without analysing psychology and circumstance at the same time. By taking the more emotional side to decision-making into account, behavioural psychologists are now developing more nuanced analyses of investors’ financial personalities that could ultimately help to make them more money.
As well as finding out how much risk investors might be willing to bear, they also deduce how nervous or comfortable people are with the prospect of investing; how clued up and engaged they are with the financial markets, and how willing they are to hand over their portfolio for someone else to manage.
Head of behavioural finance at Barclays, Peter Brooks, suggests that managing investor emotions can be as important as managing investments. He believes the approach could actually improve investors’ returns. Amid the stress, discomfort, and anxiety that naturally accompany the ups and downs of investing, this could be the best way to get more from investing. After all, not everyone is a natural born risk taker. Where do you stand?
Barclays have developed an approach to investing that seeks to take these insights into account, getting under the skin of an investor’s true financial personality. It captures personality measures such as an investor’s levels of composure, perceived financial expertise, reluctance to engage with financial markets, and risk attitudes. To understand more about your Financial Personality and to discover your levels of Risk Tolerance and Composure, visit investmentphilosophy.com. You do have to accept though that, no matter what your financial personality is and the approach you take, investing still involves the risk of losing money.