Measuring our appetite for risk

Posted on May 7, 2014 by - Investment, News

More than twice as many men choose the highest possible risk option to boost their savings compared to women

Findings recently published in the Zurich Wealth Risk Report show that more than twice as many men choose the highest possible risk option to boost their savings compared to women (13% vs 6%)[1].

The study, tracking investor attitudes and behaviour, questioned consumers about their willingness to take risk and capacity to accept a loss on their investments. It found that although people’s attitude to risk tends to shift very little throughout their lives, their overall appetite for risk will change. This is influenced by a wide range of factors, including age, location, use of advice and life stages such as marriage.

Gender breakdown
Four different investment types have emerged from the study. Men make up the majority of the groups with a higher appetite for risk, but when it comes to the lower risk groups, the split is less defined, as shown below in the gender breakdown within each investment type:

Stags, opting for the highest risk option – 76% men vs 24% women

Bulls, willing to take high risk – 65% men vs 35% women

Owls, sticking to a low-risk portfolio – 55% men vs 45% women

Squirrels, playing it safe – 54% women vs 46% men

Higher levels of risk
It also seems that the wealthier a man is, the more likely he is to be a Stag – with 15% of those with investable assets worth over £100k or more opting for higher levels of risk compared to just 1% of women from the same group.

In addition, age appears to impact on our appetite for risk. While the findings show that we’re more willing to take risk when we’re younger – with one in five Stags being under 35 – this falls over time to just 4% of 65–69 year-olds. However, the percentage of Stags leaps threefold to 12% when investors hit 70, suggesting a higher level of disposable wealth and higher capacity for risk.

Risk attitude shift
It is particularly interesting to see the shift in risk attitude for investors over the age of 70, although this may reflect the fact that they generally have fewer financial responsibilities with mortgages paid off and no dependents living at home – which in turn is likely to have an impact on their levels of disposable income and their view of higher-risk investments.

The findings also highlight the fact that while attitude to risk is likely to remain static throughout our lives, our ability to take risk differs depending on life stage and our personal circumstances.

Source:
[1]This is based on research commissioned by Zurich for NMG Consulting to conduct
1,000 online interviews with investors with savings and investments worth £10k or more. 24 September–
4 October 2013

Tax rules and legislation can change and the information given here is based on our understanding of law and current HM Revenue & Customs practice. The value of an investment can fall or rise, so you may not receive back the amount you invested.