Before I had children, I did some crazy, life-threatening things. Like set off on a run for intermediate skiers after my first few turns on a nursery slope. I toppled and slid fast, backwards down the mountainside, my unprotected head narrowly missing a rock.
At the time, I thought it was hilarious. So did my (future) husband, his cousin and some friends.
Later we heard about British actress Natasha Richardson who died in hospital from what seemed at the time to be a small knock to her skull after she lost her balance on skis. More recently, racing legend Michael Schumacher hit his head on an easy run and, as a result, has been gravely ill for much of this year.
But my physical risk-taking changed quickly after my sons arrived. These days, I ski like a very old Granny taking her vintage banger for a slow Sunday afternoon drive.
I wear an unbecoming helmet and I stick to the wide, smooth slopes. No attempts at fancy manouevres for me.
This change in behaviour has nothing to do with my age or fitness level. Lurking at the back of my mind whenever I encounter danger is the fear of what would happen to my children if I popped off. Questions like “who would look after them?” and “how would they cope emotionally?” flash up.
As a result of this deep-rooted concern, and the caution it brings out in me, I am officially a bad skier. If you want to be any good at carving your way down an alpine piste, you have to take risks.
You have to be decisive about how best to take your chances with long planks of wood connected to your ankles – at speed. Counterintuitively, you have to lean down towards the valley below, instead of into the comfort of the mountainside. Ironically, the more cautious you are on a steep, icy slope, the harder it is to get to the bottom.
The same applies to investing. Conservative behaviour is incredibly bad for our wealth-building efforts.
If we are too scared to take any calculated risks – for example leaving money in a bank instead of investing it in shares or another asset class – our cash will lose its purchasing power over time. We will be poor if we don’t take on any risks.
Financial intermediaries and product providers like to put people in risk appetite boxes. These are usually allocated to us according to age.
You will be told that if you are just starting out investing you should be taking on more investment risk. And, as you get older, you should reduce your risk until you are taking on only very low-risk investments by the time you retire.
But, life is more complicated than our needs changing as we add birthdays to our timeline. This is exactly the message contained in a Wealth Risk Report released by global multi-line insurance provider Zurich earlier this year.
The insurer aims to improve understanding of risk appetites and investment success. It undertook about 1 000 interviews with people who have the equivalent of at least £10 000 available for investment. All of the people included in the survey are on the books of financial intermediaries.
I was interested, though not surprised, to see in this report that people become more conservative investors when they have responsibility for others – like children. Yes, we are more willing to take on additional risk when we are younger, but this falls when we are in the prime child-rearing age groups.
Then, as we get into early retirement, our risk appetite increases sharply. It leaps, in fact, when investors hit 70. So elderly people have much in common with young bachelors and bachelorettes when it comes to preparedness to take on investment risk.
These individuals, particularly the retired set, probably have more disposable wealth and can therefore afford to lose more if their risks don’t pay off. But there is quite possibly more to this risk appetite than having extra funds to cushion losses.
Mark Peters, Zurich’s Head of Retail Wealth, says this shift in risk attitude for investors over the age of 70 “may reflect the fact that they generally have fewer financial responsibilities”.
Mortgages are paid off and there are no dependents at home. This, says Peters, “is likely to have an impact on their levels of disposable income and their view of higher risk investments”. The findings, he notes, highlight that our ability to take risks differs depending on life stage and our personal circumstances.
The report packages investors in specific groups: stags, who opt for the highest risk; bulls, who are willing to take high risk; owls, who stick to low risk portfolios; and squirrels, who play it safe. The research finds that women are overwhelmingly more cautious than men, and are the majority in the “squirrels” category.
This gender discrepancy is rather like the one noticeable on the slopes. When I survey the black runs and forbidden off-piste zones from the safety of an overhead ski lift, the bodies bouncing and flying around moguls and slipping down sheer drops are overwhelmingly male.
The Zurich report on risk appetite has given me hope that there’s still time for my skiing to improve. Maybe I will set off on an advanced run in my advanced years, along with all those risk-taking daredevils.
Meanwhile, I have made a mental note to check that my investment strategy is not as conservative as my alpine endeavours. That’s likely to be a far bigger risk to my family’s wellbeing than my poor parallel-ski technique will ever be.
And next week when I’m in Méribel – the area where, incidentally, Schumacher hurt himself – I expect I will take it just as cautiously on the pistes as I have done since my children were born. Like a typical squirrel…
Enjoy the festive season break, everyone!