Dear Mrs. P,

Risk classification is just nonsense to me. There is no such thing as a product being a low risk or a high risk. It depends on the client's existing portfolio, financial objectives and personal experience.

Take for example, fixed deposits are seemingly "low risk" but if a young person save everything up in fixed deposits there is a good chance that such a person will have difficulty retiring because his or her money is being eroded by inflation and not working hard. Thus in that view, a fixed deposit can be a "high risk."

Take another example, if a product has the same standard deviation as equity but is perfectly negatively correlated, such a product if placed into a person portfolio which currently consist of entirely equity will increase the sharpe ratio significantly. From that point of view, such a product is "low risk" to such a person.

Thus if you ask me about risk classification - I am sorry to say that that's just nonsense to me.

Wilfred