quinn life fund performance, and risk explanation?

[firstin]

hi, i opened a quinn life policy at the end of august and was hoping some of you could help me understand how the movement of these funds works. I went for a fund allocation of 60% euro, 20%japan, 10%china, 10% emerging markets. The policy has grown by 7.6% already which i'm happy about. i'm open to risking my money even more though, so when i look at the growth for china fund since i started being 26%, i think why the heck don't i just stick alot more of my money into that fund.
before i decided my initial fund allocation i took into account what was said on this forum: that past performance is no indication of future performance, and also that i should diversify my portfolio, and to consider the currency risk, and I also considered the risk indicators provided by quinn life. i don't know much about economics, but it seems to me that perception is very important and i've heard so many times in work and in the media about the potential for further economic growth in china and india. so chucking a lot more of my money into the china fund doesn't seem that risky to me at the moment. i guess what i'd like to find out is how is risk calculated, quinn life have a chart showing the risk of their funds in the following order starting at the least risk: 1.cash, 2.eurobond, 3.celtic/euro freeway, 4.uk/us/japan, 5.Tech/china/emerging/latin america, 6.biotech
loads of questions spring to mind on his:
1.) What is it that makes funds like china and biotech so risky?
2.) When Quinn Life talk about risk are they talking about the potential for the price to go up and down by larger ammounts, or are they talking about the potential for it to collapse altogether?
3.) If it has potential to collapse then do people see this as a relaistic possibility for the china fund?
4.) Is there a formular for risk?
5.) Will the risk of investing in china reduce as their economy matures?
sorry i think i'm asking the same question over and over here, the answer being" go read a book about economics", maybe its best if somebody has some good websites or books they can recommend to learn about this type of stuff.

 

[PMU]

1.) What is it that makes funds like china and biotech so risky?

[FONT=&quot]It all depends what you mean by ‘risk’. The Biotech fund has been up and down (mainly down) a lot recently, and has become more volatile, i.e. more risky. [/FONT]

2.) When Quinn Life talk about risk are they talking about the potential for the price to go up and down by larger ammounts, or are they talking about the potential for it to collapse altogether?

[FONT=&quot]You need to ask QL on this. Personally, I think their risk ratings are more an indicator to potential customers of the possibility of a decline in value of the fund in the short term, than anything else (i.e.there may be short term volatility).[/FONT]

3.) If it has potential to collapse then do people see this as a relaistic possibility for the china fund?

I think all who are betting the farm on China should take a look at this piece in today’s London Times.
http://business.timesonline.co.uk/tol/business/industry_sectors/technology/article2633422.ece

4.) Is there a formular for risk?

Typically, it’s the standard deviation of the change of the price of the fund. But there are others.
A good book on risk from a financial viewpoint is ‘Against the Gods’ by Peter L. Bernstein.
[FONT=&quot]http://www.amazon.com/Against-Gods-Remarkable-Story-Risk/dp/0471121045[/FONT]

5.) Will the risk of investing in china reduce as their economy matures?

Who knows? Who cares? What is important is your asset allocation and the co-variance of your China investments with other investments in your portfolio.

[FONT=&quot][/FONT][FONT=&quot](In case I'm accused of conflicts of interests, I’ve (small) investments in both QL Biotech and China funds).[/FONT]

 

[tyoung]

Those are very good questions. Professionals rarely define risk as permanent loss of capital. Instead they prefer to talk about volatility etc but I like your second definition of risk. In general concentrated funds (tech , biotech) and single country funds are considered riskier than more broad based funds. Any fund with a foreign currency element is also considered riskier.
China is up 237% year on year. Even Alan Greenspan who famously couldn't identify the US property bubble has declared China a bubble.
I think for the longterm investor there is significant risk there.

 

[roland]

so when i look at the growth for china fund since i started being 26%, i think why the heck don't i just stick alot more of my money into that fund. so chucking a lot more of my money into the china fund doesn't seem that risky to me at the moment.

If China has gone up by 26% in a couple of months, it's probably just as likely to go down by 26% in a couple of months. That's why you wouldn't simply chuck a lot more of your money in that fund. China has fallen 7%-8% in one day, and equally gone up by as much in another day. Get that timing wrong and ouch! That's why it is classed as high risk. Very volatile. High risk means potential for large reward but also the potential for large losses. If you can take losses of that magnitude then the risk you take might get you the higher rewards such risk-taking demands. If you can't afford to lose that sort of money, I would suggest you stick with diversifying your money across different countries.

 

[firstin]

thanks for the replies, i think i'll chance allocating a bit more towards china for the short term but i won't bet the whole lot on it.