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Risk and return: striking the right balance   By Edwin Lo Chief Investment Officer

Understanding your organisation's level of comfort with risk and reviewing this regularly is a critical part of the investing process, writes UFS Chief Investment Officer, Edwin Lo.   When it comes to investing, risk and reward go hand in hand. This is because investments that offer a higher return generally come with higher volatility and risk of capital loss, particularly in the short-term. For investors, an important starting point in determining how to invest is to understand their risk tolerance, which is the level of risk they are prepared to accept in order to generate a return. This then helps to determine the type and balance of investments to choose. Greater risk tolerance is often synonymous with investment in stocks, property and alternative investments such as infrastructure, while lower risk tolerance is often associated with the purchase of fixed income assets such as bonds, and cash or cash-like investments. The chart below shows the risk and return profiles of each of the different asset classes. Source: MoneySmart How to manage investment risk 1. Diversify When selecting an asset allocation, one way to manage risk is to diversify investments across different asset classes. The benefit of this is that different asset classes perform well at different times in the market cycle. If a portfolio contains one or two asset classes that are performing poorly at a given time, there may be other asset classes that are performing better and helping to balance out any losses. It is also important that an investment portfolio is diversified within, as well as across, all asset classes. This means spreading risk by investing in a range of companies or assets across different sectors to lower the potential for volatility in returns when one company underperforms. 2. Consider the timeframe The investment timeframe also has a significant impact on investment decisions and the risk an investor is prepared to take. For example, an investor with a short-term financial goal, such as saving for a property purchase, paying for Church repairs or paying salaries, may wish to invest in low-risk assets such as cash or fixed-term investments to preserve capital. A second investor who has a long-term investment horizon, and therefore has time to ride out the market ups and downs, may consider investing in higher risk assets such as stocks, property and infrastructure in order to maximise their returns. 3. Revisit the investment strategy Finally, investors should review their investment strategy regularly to ensure it is still appropriate for their needs. If circumstances have changed, the plan can be updated accordingly. Get the right advice If your organisation is looking to review its investment strategy, help is available. Uniting Financial Services (UFS) offers a range of investment solutions which have been designed with Church entities in mind and can work with organisations to understand their unique investment goals. To get in touch email UFS at contactus@unitingfinancial.com.au   Important information: The Uniting Financial Services (UFS) unregistered managed investment schemes are available for investment only to wholesale investors. Prospective wholesale investors who wish to invest via our unregistered managed investment schemes can access the Information Memoranda for these any of these funds on the UFS website. While the information in this email has been prepared with all reasonable care, UFS accepts no responsibility or liability for any errors, omissions or misstatements however caused. No action has been taken to register or qualify these products or otherwise permit a public offering of these products in any jurisdiction outside Australia. Past performance is not indicative of future performance.

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  Important for you to know Financial services are provided by The Uniting Church (NSW) Trust Association Limited ACN 000 022 480, ABN 89 725 654 978, AFSL 292186 (“UCTAL”) and by The Uniting Church in Australia Property Trust (NSW) ABN 77 005 284 605 (“UCAPT”) (together and separately “Uniting Financial Services”), for The Uniting Church in Australia, Synod of NSW and the ACT (“Synod”), under a s.911A Corporations Act 2001 (Cth.) authorisation and pursuant to APRA Banking Exemption No. 1 of 2021 and ASIC Regulatory Guide 87 and ASIC Corporations (Charitable Investment Fundraising) Instrument 2016/813 exemptions. Uniting Financial Services® is a registered trademark of UCTAL used with permission of UCAPT. None of The Uniting Church in Australia, UCAPT and UCTAL is prudentially supervised by APRA. Therefore, investments with or contributions to these Uniting Church organisations will not receive the benefit of the Financial Claims Scheme or the depositor protection provisions in the Banking Act 1959 (Cth.). All financial services and products are designed for investors who wish to promote the religious and charitable purposes of Uniting Financial Services and The Uniting Church in Australia and for whom profit considerations are not of primary importance in their decision to invest. The information on this page has been prepared without considering your objectives, financial situation or needs. You should, before acting on it, consider its appropriateness to your circumstances or refer to the relevant disclosure document. Loan applications are subject to credit approval. Interest rates are subject to change. Fees and charges may apply. 

Kindly note that the information on this webpage is only intended for wholesale, professional or sophisticated investors (as defined in the Corporations Act). Please do not refer to this webpage if you are not one of these investors. Uniting Financial Services is not providing any personal advice or recommendation regarding any financial products described or referred to on this webpage. Prospective investors should make their own enquiries and should seek all necessary financial, legal, tax and investment advice. Past performance is not indicative of future performance, all information contained on this wepbage is current at the date of publication, however may be subjected to change without notice.