How-To


Capacity For Loss How To

Request

  • Bob has £100,000 currently invested in a risk rated ISA.
  • He contributes £500 per month to his ISA.
  • He expects to increase his contributions each year, broadly in line with price inflation increases.
  • Bob wants to know which risk profile within risk group 5 would allow him to meet his ISA balance target of £150,000 after ten years, with a 95% probability
{
  "balance": 100000,
  "contributions": {
    "amount": 500,
    "frequency": "MONTHLY",
    "increase": {
      "basis": "RPI",
      "rate": 0
    }
  },
  "riskGroup": 5,
  "term": 10,
  "target": 150000,
  "percentile": 5
}

Result:

  • For Bob to surpass his minimum ISA target of £150,000, his highest risk profile capacity is 3. This will enable him to be comfortable with the potential shortfall in investing, but also to be exposed to a higher return than risk profiles 1 and 2.
{
    "riskResults": [
        {
            "risk": 1,
            "value": 162303.38
        },
        {
            "risk": 2,
            "value": 158053.66
        },
        {
            "risk": 3,
            "value": 153107.67
        },
        {
            "risk": 4,
            "value": 144903.95
        },
        {
            "risk": 5,
            "value": 132049.34
        }
    ],
    "riskProfileCapacity": 3
}