The range of portfolios would sit on a scale of 1 to 10 in terms of volatility risk as follows:

We try to keep things simple, so these portfolio objectives need some further explanation.

‘Diversified portfolio’ means spreading your investments across different types of holdings which will include stocks & shares, property companies, fixed interest (loans to governments and companies), cash and investments that behave like cash and commodities like precious metals, water, timber for example. This diversification helps to control and spread the volatility risk.

‘Defined by a percentage of allocation to equities’ means when we look at the volatility risk of each portfolio we say that the UK FTSE 100 companies have a risk of ‘100’ and that cash has a volatility risk of ‘0’. The portfolio's risk then sits somewhere on the scale between 1 and 100, so a middle of the road portfolio would be around ‘50’ on this scale but will change within certain limits over time.

‘A strategic asset allocation model’ basically means that once we have allocated the main asset classes outlined above to create a portfolio that sits within a risk scale we then review this and make tactical decisions based on market and economic trends to slide the risk of the portfolio jup and down within its risk range boundaries but trying to reduce exposure to things going down in value and increase exposure to things increasing in value.