Graham Bentley: The risk-reward coin is now double-headed

Beware the latter-day alchemists

Most asset allocation processes thrust upon advisers now look at things the wrong way round, warns Graham Bentley, with profilers calculating a risk level in the absence of an investment objective.

"Ships in a harbour are safe. But that's not what ships are built for…" Admiral Grace Hopper Investing is primarily about returns - mitigating our future deficiency needs and, if we are lucky, fulfilling some aspirations too. We forego spending now, in exchange for benefits in the future. Asset allocation aims to deliver those required returns without undue risk - it is about efficient portfolio management. We have, however, created a set of conditions where the risk tail now wags the investment dog. Most asset allocation processes thrust upon advisers are risk-focused - profile...