Risk assessment is a topical subject in the investment trust sector. Several fund management groups have started issuing risk gradings from their investment trusts. Money Management and Micropal now publish volatility figures and in March 1995, the Association of Investment Trust Companies issued a fact sheet on risk for private investors which proposed the use of volatility in the risk assessment of investment trusts. This paper develops a model which splits the variance of total returns to shareholders into three components. The relative importance of each of these components is then estimated for different time intervals using historical data. The results emphasise the importance of the investor's time horizon. This suggests that there should be separate management group risk gradings for private investors with different time horizons. For most investors, standard deviation of net asset value return is more appropriate measure of risk than volatility.