Overly cautious approach could cost investors up to £93,000

Pension savers and investors taking an overly cautious approach towards their investments could be at risk of losing out on up to £93,058 in returns, according to research by Aegon.

However, the research, surveying 250 advisers, found that over a third (34 per cent) of savers became less cautious about their investment risk following a discussion with their adviser.

Its analysis of stock market returns found that the difference in returns for a £200,000 investment over a period of 20 years “can be stark”, with an example ‘cautious asset mix’ generating returns of just £249,068, compared to £342,126 in a “more adventurous asset mix”.

Commenting on the research, Aegon investment director, Nick Dixon, said: “Risk tolerance varies greatly from one person to another and reflects a large number of factors including our personality, our knowledge of a subject, and even societal factors.

“What’s clear from our figures is that a significant proportion of advised clients are excessively cautious when it comes to investing and that a conversation with an adviser shifts their views about how much risk they can afford to take.

“There are many benefits to financial advice, notably the peace of mind that being advised by an expert provides, but it’s clear supporting individuals to take on the right level of risk is one of them. All investors should remember that risk taking is an essential driver of long-term returns”

Dixon added: “For investors with a long-time horizon, excessive caution can be the greatest investment risk. Financial advisers are well placed to take an objective view of an individual’s circumstances and determine whether they can afford to take on risk in exchange for greater potential upside.”

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