🤔 “Are You a Risk Taker?”

People love to tell me I’m a risk taker. I was at a Rebel Business School event, talking about starting businesses (as you do), and someone piped up:

“It’s alright for you, Alan. You’re a risk taker!”

I nearly spat out my coffee. ☕ Me? A risk taker? Have you met me?

I actually see myself as risk averse. I don’t like gambling with my money, my business, or my life. I don’t jump out of planes, I don’t buy crypto based on TikTok tips, and I definitely don’t invest in anything that has the word “opportunity” in air quotes. 😂

But that comment got me thinking… 🤔 What do other people see as risky that I see as the safe bet?

• Is it risky to start a business?
• Is it risky to invest in the stock market?
• Is the “safe” thing to do really getting a job and staying there for 40 years until you retire with a gold watch and a dodgy back?

💥 Spoiler alert: what most people call “safe” might actually be the riskiest move of all.

📈 Is It Risky to Invest in the Stock Market?

Short answer: it depends on how you do it.
Long answer: it really, really depends on how you do it. 😅

There are three main ways people dive into the stock market pool:

1. 🎯 Stock Picking or Trading – AKA “I read a Reddit thread and now I’m buying Tesla.”
2. 💼 Actively Managed Funds – AKA “I pay someone in a suit to guess for me.”
3. 🌍 Index Funds & Passive Investing – AKA “The Donegan-approved chill route to wealth.”

Let’s break it down:

• Stock picking and trading is basically financial roulette. You’re betting on individual companies, trying to time the market, and hoping your “gut feeling” is smarter than Wall Street’s algorithms. Spoiler: it’s not. 🎰
• Actively managed funds are like hiring someone to gamble for you—except you also pay them a fee whether they win or lose. It’s like going to Vegas, handing your wallet to a stranger, and saying, “Good luck, mate!” 🎩💸
• Index funds, on the other hand, are the Rebel way. You’re buying a tiny slice of everything—the whole market. No guessing, no crystal balls, no stress. Just long-term, low-cost, diversified investing that historically works. 📊🚀

So yes, the stock market can be risky… But only if you treat it like a casino instead of a long-term wealth-building machine.

Katie and I don’t see investing in index funds over time as risky at all. But I guess before we even get into that we need to understand what risk is:

🧠 What Is Risk, Anyway?

So there we were, mid-Rebel Finance School session, talking about our favourite topic: low-cost, broad-based index funds (aka the Beyoncé of investing). 💃📈 If you are thinking “what is an index fund?” read our article here.

That’s where Katie and I have all our money. Yep, 100%. No bonds. No crypto. No gold bars under the mattress. Just index funds. And we sleep like babies. 😴

Then someone in the chat asked, “What would you do in my situation?” Before we could even answer, the comments exploded:

• “Ask her about her risk tolerance!”
• “What’s her risk profile?”
• “Does she like rollercoasters or knitting?” 🧶🎢

Apparently, before you’re allowed to invest, you have to take a personality quiz to find out if you’re a “Cautious Koala” or an “Adventurous Alpaca.” 🦙

Here’s the kicker: the strategy Katie and I follow—100% stocks via index funds—is considered one of the riskiest by financial institutions. SCANDALOUS! 😱

Why? Because we don’t own any bonds. Not a single one. Nada. Zip. We hold a little bit of cash for short term spending and emergencies but everything else is invested, working, growing for us!

According to Vanguard’s LifeStrategy funds, that puts us at the far-right end of their “risk spectrum.”

• On the left: 80% bonds, 20% stocks = “super safe.”
• On the right: 100% stocks = “you wild, reckless maverick!”

But here’s the twist: we think they’ve got it completely backwards.

To us, the more bonds you hold, the slower your money grows and the more likely you are to run out of money in retirement.

And the more stocks you hold, the faster your money grows and the more likely you are to have money left over to buy Lego and pizza in your 90s. 🍕🧱

So… what gives? Why do they call our strategy risky?

Let’s dig into how they’re actually defining risk—and why it might be time to flip the script. 🔄

🔄 Wait… Who’s Really Taking the Risk Here?

Here’s where things get really interesting. Vanguard—and most of the traditional finance world—say that the more stocks you have, the riskier your portfolio is.

But I see it the exact opposite way. 🤯

Why? Because the more bonds you have, the more likely you are to run out of money in retirement. Yep, you read that right. Bonds = “safe” = broke at 78 or maybe never actually having enough money to retire as they don’t grow in comparison to inflation. 🧓💸

This isn’t just my opinion—it’s backed by the legendary Trinity Study (aka the birthplace of the 4% rule). The study shows that portfolios with a higher percentage of stocks are more likely to survive retirement and leave you with money left over for Lego, pizza, or a llama farm. 🧱🍕🦙

So while Vanguard’s diagram says:

• 80% bonds = “super safe” 🛟
• 100% stocks = “danger zone” 🚨

I’m sitting here thinking:

“How are they measuring risk?!”

Turns out, they’re using something called the SRRI (Synthetic Risk and Reward Indicator). But what even is that?

📊 Risk Score Shenanigans: What Does “5 out of 7” Even Mean?

So, each Vanguard index fund gets a risk score out of 7.
The one Katie and I are invested in? A solid 5 out of 7. Cue dramatic music: 🎻 “Ooooh, risky!” 😱

But here’s the thing… we don’t think it’s risky at all. So naturally, I went down the rabbit hole to figure out how they’re coming up with these numbers. 🕵️‍♂️

Here’s what Vanguard says in their help section:

“This is the fund’s synthetic risk and reward indicator (SRRI), an industry standard measure from 1 to 7.”

Crystal clear, right? 😂 I mean, what even is a synthetic risk and reward indicator? Sounds like something you’d find in a sci-fi movie. So I dug deeper and found the official explanation from the European Securities Regulator’s methodology document:

“The synthetic risk and reward indicator shall be based on the volatility of the fund.”

Ahhh, now we’re getting somewhere. They’re not measuring risk as “chance of losing money.” They’re measuring volatility—how much the fund jumps up and down like a toddler on a trampoline. 🤸‍♀️📉📈

But here’s the Rebel twist:

Volatility ≠ Risk.

Just because something moves around a lot doesn’t mean it’s dangerous.
Katie and I define risk as:

“What’s my chance of losing money?”

That’s it. Simple.
If the chance is high, it’s risky.
If the chance is low—even if the ride is bumpy—we’re good.

So while the finance industry is busy rating funds based on how wiggly the graph is, we’re asking the real question:

Will this investment grow over time and help us retire with dignity, Lego, and pizza? 🍕🧱

🎢 Volatile? Yes. Risky? Not So Much.

Let’s get one thing straight: our investing strategy is WILDLY volatile. But is it actually risky? 🤔

The stock market is like a caffeinated kangaroo—it bounces all over the place. 🦘📉📈

Take the Covid crash, for example. Between 12th February and 23rd March 2020, the Dow Jones dropped 37%. That’s not a dip—that’s a full-on nosedive! 💥

Katie and I watched £186,000 vanish from our net worth in a matter of weeks.

• Did we panic? Nope.
• Did we sell? Absolutely not.
• We made a cup of tea and carried on. ☕💪

Because here’s the thing: it was only a loss on paper. We didn’t sell, so we didn’t lock in the loss. And guess what?
The market bounced back—like it always does—and went on to hit new highs.

The stock market is a drama queen. It crashes, it recovers, it crashes again. There’s always another crash coming. But if you’re investing for the long term, that’s just background noise.

So yes, the market is volatile. But volatility ≠ risk.

If you’re investing in a broad-based index fund (like ones that tracks the S&P 500), your chances of losing money drop dramatically the longer you stay invested.

Let’s look at the historical odds of losing money over different time periods—from 1942 to 2025.

Katie went off for a couple of days. Analysed 20,000 rows of data and came back with the following results. You won’t see this analysis anywhere else. This is a Katie Donegan, RFS exclusive!

Spoiler: the longer you stay in, the safer it gets. 📈🛡️

📉📈 Volatility Feels Scary… But What Are the Actual Odds?

Let’s talk numbers. Because while the stock market can feel like a rollercoaster, the data tells a very different story.

If you invest for just one year, you’ve got a 26% chance of losing money. That’s more than 1 in 4! 😬
And I don’t know about you, but I’m not a fan of those odds. I have a low tolerance for watching my money disappear faster than a pizza at a Rebel Finance School lunch break. 🍕

BUT… here’s where it gets juicy:

• Invest for 5 years? Your chance of losing money drops to just 15%.
• Stick it out for 10 years? Now we’re down to 7%.
• Go long-term with 12 years? Only 3% chance of loss.
• And if you invest for 14 years or more?
  🥁 ZERO. CHANCE. OF. LOSING. MONEY.
  That’s right—100% of historical 14-year periods have ended in profit.

So yes, the market is volatile. It zigs, it zags, it throws tantrums. But if you’re in it for the long haul, the risk of losing money becomes vanishingly small.

It’s the same with starting a business without debt. Sure, it’s a bumpy ride. You’ll have wins, flops, and probably cry into your coffee once or twice. ☕😭 But if you didn’t borrow money to start, where’s the financial risk? You’re just investing time, energy, and maybe your ego.

So whether it’s the stock market or your own business, the key isn’t avoiding volatility—it’s understanding that volatility isn’t the same as risk.

🏷️ Cautious? Adventurous? Or Just Confused?

Over the years of running Rebel Finance School, Katie and I have toyed with the idea of getting sponsorship to help keep the course free and fabulous. We thought, “Hey, maybe we could partner with a big-name pension provider to help fund web hosting, video creation, and maybe even pay someone to answer all the emails that start with ‘Quick question…’” 📬😅

So we started looking into the big players in the UK pension world.
And what we found? Shocking.
Not in a “plot twist in a Netflix drama” kind of way—more like “Wait, people are actually investing in this??” 😳

Take Wealthify, for example. They’ve made it super easy to choose a fund by giving them friendly little labels based on how “risky” they are:

• 🐢 Cautious
• 🐾 Tentative
• 😌 Confident
• 🚀 Ambitious
• 🧗 Adventurous

Sounds like a personality quiz, right?
“Pick your vibe and we’ll match you with a fund!”
But here’s the kicker: these names are marketing, not strategy.

I mean, who wouldn’t want to be “Confident” or “Adventurous”?
But what do those labels actually mean for your money?
Spoiler: not what you think.

We’ll dig into the actual performance of these funds in a moment (brace yourself), but for now—if you had to pick one based just on the name, which would you go for?
Vote below and tell us: are you a Cautious Koala or an Adventurous Alpaca? 🐨🦙

🐢 Katie’s First Investment: The “Cautious” Misstep

Back in the early days—before we knew what an index fund was or why fees were the silent killers of wealth—Katie made her very first investment. After a risk profile questionnaire from the IFA he picked a “Cautious” fund for Katie. Why? Because they both considered herself risk averse, and the name sounded like it came with a safety harness and a cup of tea. ☕🛟

What she didn’t realise was that by ticking the “low risk” box, her financial advisor automatically shoved her into two funds that were only 45% stocks and shares. The rest? Bonds and “safe” stuff. This was in her late 20s, with decades of investing time ahead of her! She had time on her side, but her portfolio was acting like it was already retired and living in a bungalow in Bournemouth. 🏡

Here’s the kicker: the advisor equated risk with volatility, not with the actual chance of losing money. And to be fair, that’s how the finance industry thinks. They assume that if your investments wobble, you’ll panic and sell at the worst possible time. So instead of educating you on the difference between short-term wobbles and long-term growth, they just stick you in a “cautious” fund and quietly sabotage your financial future. 🎯💸

And cautious funds? They’re the underachievers of the investment world. They load up on bonds, cash, and other “safe” assets that consistently underperform. Over time, some of them don’t even beat inflation—which means your money is slowly losing value while wearing a name tag that says “safe.” 🤯

Advisors at investments firms around the world are conducting surveys asking if you are a risk taker or not. If they did a survey for me they would probably put me into the cautious fund too as I don’t see myself as a risk taker.

If they ever looked at what I was actually invested in they would see me as a huge risk taker.

We took Wealthify’s five funds and looked at their performance from February 2016 (when they started) until June 2024. We also compared them to the Vanguard FTSE Developed World ex. UK fund (a low-cost passive index fund). We looked at how much a £10k initial investment would have been worth at the end of the period.

Have a guess which fund returned the worst. Clue: starts with “C” and ends in “autious”.

Yep you guessed it! The cautious fund performed the worst out of the funds analysed. If you had invested £10,000 it would have grown to £10,920 over 8 years (it’s actually a bit longer than 8 years but I’m going to round to 8 for ease of writing!)

You might be thinking “WOO! I made £920! Not too shabby”.

However! Just to keep up with inflation (i.e. your £10,000 has the same purchasing power 8 years later) you would have to have £13,066 at the end. The cautious fund made LESS than inflation in the 8 years.

If you had invested in the cautious fund you would have lost money after allowing for inflation

I find this crazy. I am paying a team of fund managers to lose money for me over the long term. Talk about risk! If you invest in this kind of fund you have a damn good chance of losing money over the long term.

The other funds they had didn’t do much better! Time for a graph! Watch this mini animation to see the results…

The thing I would love you to notice is that all the returns of the different funds pretty much follow the same course over the years. You can see all the investments dipped in March 2020 (the Covid dip) and then bounced back.

The five actively managed funds consistently under-performed the Vanguard fund which is a low-cost passive index fund. You have paid Wealthify extra, they have worked harder and they have got you FAR worse results.

The other key thing to notice is the purple inflation line. You can see that it beats 2 of the 5 funds!

Your investments in the cautious and tentative funds would not have kept up with inflation. You are literally worse off having invested with them!

The top Wealthify performer was the adventurous fund (designed for the “risk takers” out there!). With this fund would have ended up with £18,110 after the 8 years which is only about 60% of what you would have with the Vanguard low-cost index fund at £29,759.

Let’s look at the difference between the various funds visually and let’s see what profit you would have made on your £10k after inflation for each of the funds. In other words, how much on top of your £10k initial investment you would get back after allowing for inflation.

🔄 The Finance Industry Has Risk Completely Backwards

Here’s the wild part: I think the finance industry has completely flipped risk on its head. They tell you the riskiest thing you can do is invest in 100% stocks.

But in reality? The riskiest thing you can do is hand your money to a “trusted” fund manager, let them charge you high fees, and watch them underperform the market while smiling in a suit. 💼💸

They promise you better returns. They take time to “get to know you.” And then they stick you in a cautious fund that quietly bleeds value year after year. You pay more, you get less. It’s like ordering a gourmet meal and getting a soggy sandwich. 🥪

Let’s look at the numbers:

• If you’d invested £10,000 in the cautious fund over the last 8 years, you’d have ended up with £10,920.
  Sounds okay, right? Until you factor in inflation.
  Adjusted for inflation, that’s actually a loss of £2,146. Ouch. 😬

• Now take that same £10,000 and put it in a low-cost Vanguard index fund.
  You’d have ended up with £29,759.
  After inflation? Still a whopping £16,693 profit.

That’s an £18,000+ difference.
Same money. Same time period. Totally different outcomes.

So when the industry says, “This cautious fund is safe,” what they really mean is:

“This fund will quietly lose you money while sounding very responsible.” 😇📉

Sometimes the thing that feels safest is actually the most dangerous.
It all comes down to how you define and measure risk.

And yes—I wrote an open letter to the CEO of Wealthify about this.
Still waiting on a reply. Maybe he’s busy… or maybe he’s stuck in a cautious fund too. 😅

It is if you are borrowing a lot of money!

For years people have come up to me after the Rebel Business School courses that I run and said things like, “It’s fine for you Alan, you’re comfortable with risk!” I always look amazed as they say this especially after sitting through a 2 week course on starting a business without debt!

Upon reflection it can be risky starting a business but that risk doesn’t have to be money. You are probably going to have to risk time, energy and rejection but you don’t have to risk money!

For years my business partner, Simon, and I have been teaching five ways to start a business with no money.

​There are so many creative ways to build a business without debt. So why is starting a business risky? I don’t think it is!

​You can run a mini-experiment and test out your ideas without going into debt to do it.

If you follow a more traditional approach to starting up I can see how that would be risky. You spend months writing a business plan and researching the market, you go and get investment or a loan to finance your business and go hundreds of thousands into debt, you create everything, make it perfect and then offer it to market. You hope that people will buy!

This way of doing this is HUGELY risky and I would NEVER want to do it this way. If you start this way you risk losing the money.

One thing I do know is that if you do start your own business you are in for a volatile ride. Some days you will be on top of the world making sales and laughing and the next something will have happened to take the rug out from under you.

You will be in for a rollercoaster journey but if you start without putting money in where is the risk of losing money? I can’t see one!

The answer to this depends on how you are doing it!

If you are betting on different individual stocks, trying to time the market and dancing in and out then it is hugely risky. It is gambling.

If you are investing for 15+ years in a broad-based index fund (What is an index fund?) then there is historically a lot of volatility but very little risk of losing money. There has never been a time before that the index has gone down over 15 years. Does this mean there will be no risk going forward? No, but it does mean it is one of the safer bets you can make.

​Katie and I feel so confident in this particular decision we have invested 99% of our net-worth into index funds (the other 1% is in cash for us to spend on Lego and pizza).

Is Alan a risk take? Most of the world thinks so. Except Alan! lol

People look at me and think:

• Entrepreneur: risk taker
• Invested almost entirely in stocks: risk taker
• Speaker, blogger, podcaster putting himself out there: risk taker

And in a way I am a risk taker but I don’t risk my money. I will risk my energy, my time and my effort. I will put myself out there and build things and see if anyone wants them, but money? Money, my future, my investments? Those I will not risk.

I am not going to risk the investments and money Katie and I have spend years building up. Not after watching my dad secure £3.6m ($5m) debt against the family home in the ’90s and then lose all of it. Not after having to spend 10 years plus of my life fighting the banks and helping my mum try and keep a roof over our head. There is NO way I am ever doing something like that.

I don’t see risking my time as a risk that is going to be catastrophic. I don’t see the risk of rejection as something that is going to cause me to lose my home and force me to fight the bank for a decade. I don’t see risking my energy as a massive risk.

I don’t really see myself as a risk taker. I have taken a safe bet investing in index funds over the long term and I minimise any downside of entrepreneurship by starting my businesses without debt and for free.

Why am I telling you this? Because I feel as though people look at me and think I am a risk taker and therefore OF COURSE I am going to say that investing in the stock market isn’t risky. This just isn’t true. After the family experience I have been through I hate financial risk and avoid it at all costs.

The investment world LOVES to give us these little tests to check our risk tolerance. I think they are the biggest load of rubbish ever.

If you really understood the different ways to invest in the stock market you wouldn’t see all of them as risky. If you saw the alternative ways to build a business with no debt you wouldn’t see it as risky. If you really understood how often people get made redundant, restructured or forced to re-apply for their own jobs would you see getting a job as safe?

​For fun, I took one of the risk tolerance tests. I found the University of Missouri’s risk tolerance test and took it to see how they would rate me!

Apparently I have an average/moderate tolerance for risk. Who knew?

Does that make any difference to my investing strategy? No. No difference at all.

I don’t see investing in a broad-based index fund like the Vanguard FTSE Developed world fund as risky over the long term. If you go in knowing you are going to buy and hold and not dance in and out of the market, your chances of losing money over the long term are very low.

These risk tests are the biggest lie in the finance world and the Independent Financial Advisors make you take them and then put you in sub optimal funds.

Why don’t we just educate people about volatility and stop destroying their financial futures?

To me, buying a broad-based global index fund and holding it over the decades feels like one of the safest bets you can make! I wouldn’t have put my entire net-worth there if I didn’t truly believe that.

As always Katie and I spend a huge amount of time writing these articles and we do it for you! We want to know what you think. Please take a second to leave us a comment, question or thought. It means the world to us.

This is not financial advice. Katie and I are not trained financial advisors, nor to we pretend to be one online. Read our full disclaimer here.