Page 118 - Profile's Unit Trusts & Collective Investments - March 2025

CHAPTER 6

All figures to 31 December 2024

Risk Profile Worksheet scores can be related to volatility figures in fund fact sheets

Note that volatility can shift quickly in times of upheaval. If you are looking at one of the riskier
fund categories, look at volatilities across a range of periods. A sector may have been through a
recent period of stability (a steady trend one way or the other) which may not be indicative of the
volatility changes that could occur.
Using the Risk Number
The risk numbers calculated from the worksheets try to position you on the risk spectrum (see
Chart 6.9). It does this by quantifying both subjective (risk appetite) and objective (risk capacity)
factors which have a bearing on your ability to tolerate risk, both due to your disposition (risk
prone or risk averse), and due to more objective factors, like your age and personal circumstances.
A high adjusted score (15 and above) means that you are in a position to take on a higher level
of risk. This certainly doesn’t mean that you should take on lots of risk. Rather, it means that if you
take on a riskier investment and suffer the consequences of risk (ie, lose money), you are in a
relatively good position to deal with the situation.
A low adjusted score (below 10) means that you should be cautious about taking on risk. Again,
this doesn’t mean that you should never consider a higher risk investment; rather, it means that your
ability to recover from the blow of a risky investment that fails to perform is not very good.
If you score between 9 and 16 you have a lot of options open to you because of the volatility
overlap in the middle of the risk spectrum. If you are at the lower end of the mid-risk area, look for
funds that have below average volatility for their specific sectors.

Chart 6.9: Annualised volatilities of asset allocation categories (excluding outliers)

Non-SA Equity 10.18 23.26
SA Equity 8.36 28.82

Non-SA Real Estate 16.62 20.86
SA Real Estate 11.17 18.17

Non-SA Multi Asset 5.03 46.65
SA Multi Asset 0.00 21.14

Non-SA Fixed Interest 9.19 12.14
SA Fixed Interest 0.00 14.71
0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00

The above chart shows the volatilities of the major asset allocation categories for all rand-denominated funds compared to first-tier
South African funds, outliers excluded. (3 years to end January 2025).

116 Profile’s Unit Trusts & Collective Investments — Understanding Unit Trusts