Risk is more than a number

The focus for my innovative suggestions this week is the thorny subject of risk and why both advisers and investors need to better understand the truly volatile nature of investing.

Risk is not necessarily always a bad thing and it needs to be properly understood and quantified, but in a manner very different from the traditional Value at Risk models I have always found inadequate.   Marketing literature relating to funds should banish all that regulatory rubbish. Small print saying “investments may increase or decrease in value” should be replaced with a few simple measures of risk as well as return. Alongside the carefully selected returns data, fund managers should also detail turnover rates, true costs of ownership and, crucially, the maximum drawdowns experienc...