Steer clear of ‘risk-rated’ funds

Risk-rated funds have gained in popularity as the end of the year approaches. But before you dive in, Tim Bennett explains what you need to watch out for.

As the end of the year approaches, one group of funds is getting something of a new lease of life so-called risk-rated' funds. Many advisers are recommending them as a way of ensuring they comply with the Financial Services Authority's retail distribution review (RDR). But beware: there are traps for the unwary.

The idea seems sound enough. Product providers such as Standard Life (the MyFolio range) and Skandia (the Spectrum range) have come up with funds that are supposed to meet an individual investors' stated risk preference.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.