What is Your Investment Risk Tolerance?
By Ann B Zuraw
W is for What is Your Investment Risk Tolerance?
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What is Your Investment Risk Tolerance?[/caption]When planning to invest, you must first understand your attitude to risk. You must ask yourself whether you are prepared to risk a large, medium or small proportion of your money. How much risk are you willing to take? Do you have a high tolerance for risk or are you more conservative? Many financial advisors can help factor in you circumstance along with your comfort level and help you find a suitable risk level. This assessment will help you decide what type of investments you make.
The risk profiles below may help you identify what sort of investor you are:
No risk - The most important factor to you when considering savings is to preserve you capital. This means you tend to restrict your savings to cash deposits, interest bearing savings accounts and similar products that offer available access to your money and are covered under depositor's protection.
You understand the effects of inflation on your money and how this can reduce the value of your money overtime.
Low risk - You wish to achieve reasonable returns but would like to invest in a way that allows you to preserve more capital if the markets fall. You understand that it may be necessary to take some risk in order to achieve potential returns equivalent to or higher than those available from cash deposits. This could involve your capital being invested five years or more with low to medium exposure to stocks and shares along with other more riskier investments.
You are willing to accept that the value of your investment many fluctuate and you might get back less or more than you invested at the time of maturity or even earlier.
Medium risk - It is important to you that you have the potential to achieve attractive returns. You also wish to invest some not all of your capital in the more riskier investments. You accept this is necessary to achieve potential higher returns than those available from cash deposits. You understand that your capital needs to be invested for five years or more with medium to medium high exposure to stocks and shares and other riskier investments.
The opportunity to achieve attractive returns (for growth or income needs) is very important to you but you also want to invest in a way that does not expose all of your capital to more riskier investments. You have some experience in taking investment risks and accept this is necessary to achieve potential returns much higher than those available from cash deposits. You understand that this could involve your capital being invested for five years or more with medium to medium high exposure to stocks and shares and other more riskier investments.
You are willing to accept that the value of your investment may fluctuate and you might get back less or more than you invested at the time of maturity or earlier.
High risk - As an experienced investor you are prepared to take on a very high level of investment risk that may offer potential to achieve exceptional returns. This potential is a key priority for you, even in situations where it might pose a significant risk to some or all of your capital.
You understand that this could involve your capital being invested for five years or more with maximum exposure to stocks and shares and other more riskier investments.
You are willing to accept that the value of your investment may fluctuate and you might get back less or more than you invested at the time of maturity or earlier.
If you should have any questions or would like to set up an appointment to determine your Investment Risk Tolerance Profile, please feel free to contact me.
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