16 August 2016

Carbon’s first investment principle

Carbon’s first investment principle: take the minimum risk necessary to achieve your target return.

In the early hours after the Brexit vote markets plummeted and investors were understandably very uncomfortable. However, within a short period of time stock markets had recovered and, indeed, at the time of writing, the FTSE100 is pushing up towards a high point. The gyrations in markets (and of course the newspapers focused on the sensational falls and not on the subsequent recovery) may, however, have caused some investors to consider if they were taking more investment risk than they were comfortable with.

Risk and return are related, and the higher the return you seek, the more risk you should expect to be exposed to. In the case of Brexit, the greater the proportion of your investments that were held in UK-listed companies specifically, as opposed to safer investments like bonds and cash, the more your portfolio would have bounced around in value in the hours and days after the Brexit vote.

Brexit might be a one-off event in UK politics, but it is just one of a huge range of factors that impact on investment values every day. Stock markets are always uncertain, especially in the short term, but in the long term they tend to return more to investors, which they have to of course, otherwise investors would simply leave their money in the bank.

So how much risk should you take? Our view, and certainly our starting point, is the minimum risk required to meet your objectives. Do you need to secure a high return and therefore take a high level of risk to allow you to retire comfortably at age 55, or to help the children on the property ladder? At the other extreme, could you leave it all in the bank? Or would ‘playing safe’ by leaving it in the bank for 20 years actually mean risking not meeting your objectives?

The less risk you are able to take to meet your objectives, the more certain the expected return, and therefore the more likely you are to meet your objectives. Brexit hasn’t changed this principle, but it may be a prompt for investors to consider whether the amount of risk they are taking is the right amount of risk required to achieve their goals.

Sign-up for our Carbon Catch-Up Newsletter


Sign-up for our Carbon Catch-Up Newsletter.

* indicates required

Carbon Financial will use the information you provide on this form to keep in touch with you and to provide updates and marketing. Please indicate below that you are happy to receive our updates in the future:

You can change your mind at any time by clicking the unsubscribe link in the footer of any email you receive from us, or by contacting us at We will treat your information with respect. For more information about our privacy practices please visit our website. By clicking below, you agree that we may process your information in accordance with these terms.

We use Mailchimp as our marketing platform. By clicking below to subscribe, you acknowledge that your information will be transferred to Mailchimp for processing. Learn more about Mailchimp's privacy practices here.

Part of The Progeny Group

Progeny is independent financial planning, investment management, tax services, property, HR and legal counsel, all in one place.

Carbon Financial Partners, part of The Progeny Group, is a trading name of Carbon Financial Partners Limited which is authorised and regulated by the Financial Conduct Authority under reference 536900.

Carbon Financial Partners Limited is registered in Scotland. Company registration number SC386400. Registered Address: 61 Manor Place, Edinburgh, EH3 7EG. Carbon Financial Partners Limited is part of The Progeny Group Limited.

© Carbon Financial Partners 2024

Client Account | Personal Finance Portal | Privacy Notice | Cookies