People are constantly asking us the question, “what can I invest in?’ While it is great that you are looking to make good returns on your money, it is surprising that a lot of people never talk about their risk profile or worse, the risk of the investment being offered to them.
When you are offered an investment, it is necessary to confirm that your risk appetite [profile] matches the risk of the investment. Every investment offers a level of risk; it is up to you to decide if you can ‘stomach’ the risk or not.
What then is your risk appetite? There are 5 core investor profiles.
THE SAFETY /CONSERVATIVE INVESTOR
You are an investor who does not wish to take up any risk, that is, you are not happy to invest where your capital could be lost. Therefore, your priority is to safeguard your capital. You are prepared to forego higher returns for peace of mind of knowing your capital is ‘safe’.
THE CAUTIOUS INVESTOR
You are an investor with some understanding of the investment market. You prefer to skew your investment in favour of a little more return with just a little more risk. As such, you are happy to accept a slightly higher level of risk in return for the potential to outperform the risk-free rates.
THE BALANCED INVESTOR
You are an assertive investor who understands better than most people, how the dynamics of the investment markets work. You are interested in maximizing your funds and balancing your investment across risk free and risky assets. You are happy to take calculated risks in order to maximize medium to long term capital growth.
THE GROWTH INVESTOR
You are an investor with a strong bias towards investments with high growth potential. You are willing to accept higher fluctuations in performance, in return for potentially higher long term capital growth.
THE AGGRESSIVE INVESTOR
You are ready to lose it all! You are an experienced or sophisticated investor. The security of capital is secondary to the pursuit of high investment returns and that drives the investments you take on. This aggressive portfolio is suitable if seeking a very high return.
So, you want to invest? Which type of investor are you?