NuWealth Chillies: Investment Risk Rating Explained

At NuWealth, we get it—understanding investment risk can feel like learning a new language. That’s why we created our Chilli Rating system—a fun and simple way to show how spicy (or mild!) a fund might be when it comes to risk.

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So, where do our chilli ratings come from?

Most of the time, we use a score from something called the Key Investor Information Document (KIID). This is a short, helpful doc used mainly in the UK to give investors a quick overview of a fund—things like past performance, charges, and yes, risk.

Inside the KIID, you’ll find the SRRI (Synthetic Risk and Reward Indicator), which rates the fund from 1 (lower risk) to 7 (higher risk) based on how much its value has gone up and down in the past.

🧠 But a quick heads-up: this score is based on past performance, which isn’t a guarantee of what’ll happen in the future. It’s just a guide—one piece of the puzzle.

Across the EU, there’s an alternative version of this document called the Key Information Document (KID). It’s a bit more detailed and uses a slightly different score called the SRI (Summary Risk Indicator). Because the two systems don’t always line up, we stick to the SRRI from the KIID wherever possible—just to keep things nice and consistent.

If a fund doesn’t have a KIID (like some ETCs such as Solid Silver or Pure Gold), then we’ll use the SRI from the KID instead.

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‍What’s the difference between SRII and SRI?
SRII (Synthetic Risk and Reward Indicator)

• Primarily based on how much the investment’s value has moved in the past five years.
•  It gives a score from 1 (lower risk) to 7 (higher risk).
•  It doesn’t predict the future — it simply shows how much the investment has gone up and down in the past.

SRI (Summary Risk Indicator)

•  Looks at both past performance and forward looking assumptions.
•  It also gives a score from 1 (lower risk) to 7 (higher risk).
•  It takes into account how markets might behave in the future, not just what’s happened before.

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Now, back to chillies… 🌶️🌶️🌶️

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Our chilli rating system is just for funds—not individual shares.

Funds are like a basket of different investments (shares, bonds, property, etc.), so the risk is often more balanced thanks to diversification. If one part dips, another might rise. That’s why funds tend to be less volatile than individual shares. In the NuWealth app, we show this risk with chillies: the more chillies, the higher the potential risk and reward.

Important: The chilli rating doesn’t apply to individual shares.

Shares can be much more unpredictable, since you’re putting your money into one single company. That means more exposure to risks like that company underperforming or even failing. Plus, you’ve still got general market ups and downs to think about.

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Risk is always part of the journey
Every investment comes with some level of risk—whether it’s shifts in the economy, changing customer trends, or new laws. That’s why it’s so important to understand your own risk profile—how much risk you’re personally comfortable taking on.

We’re here to help you make sense of it all—but remember:

📌 Our chilli ratings are just a guide.
They’re a helpful tool, but not financial advice. Always do your own research and consider your full financial picture before investing. You can find all the official fund documents anytime, straight from the app.

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‍Understanding Risk

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For investors, risk is typically divided into three groups: Conservative, Moderate, and Aggressive. The amount of risk you take will reflect the potential earnings you can make in the future. The more conservative, the less the expected future returns.

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Conservative investors try to play things as safe as possible. They might invest mostly in government bonds from developed economies such as the UK or the US, or perhaps in stocks from large companies that are more likely to be around in the future. Their exposure to riskier stocks will be very low. The fewer the chillies shown on a Theme, the more conservative it is.

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Aggressive investors will put a lot of their money into stocks that look like they have large potential but have not yet delivered returns, for example niche technology stocks. Aggressive Themes are the ones that have the most chillies associated with them.

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Finally, moderate investors will seek to blend the two activities in order to provide some stability in their returns with reduced risk in some areas, while still being exposed to some stocks and funds that are a bit riskier but could also deliver higher returns. These are shown as the Themes that have an average/medium amount of chillies displayed.

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How do I set my own risk profile?

A lot of factors come into play here, including: your age, salary, and your savings goals. Typically, the younger you are, the more risky you can afford to be. This is because you will have more time in the market to make up for any potential losses.

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Risk comes from not knowing what you're doing.

- Warren Buffett, Billionaire Investor

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If you are investing towards a specific goal, then you may want to be less risky so that you can make sure you will earn the required amount at the time that you need it.

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With regard to investment in equities you should bear in mind the following specific risks:

· Equity markets may fall in value

· Dividend growth is not guaranteed, nor are investee companies obliged to pay a dividend

· Companies may go bankrupt rendering the original equity investment valueless

· Individual equity prices can go down as well as up

· Corporate earnings and financial markets can be volatile

· Where investments in overseas companies are concerned, foreign exchange rates may move in an unfavourable direction adversely affecting the valuation of investments in currency terms

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Individual equities are made available on the NuWealth Platform on a direct offer basis and you are responsible for ensuring that your selection is appropriate to your needs and circumstances. We will conduct trades on an execution-only basis on your instructions transmitted through the platform. We do not offer financial advice. If you are in any doubt about how to proceed, you should consult a qualified independent financial adviser, used to advising on individual shares.

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