Understand your attitude to investment risk and capacity for loss
There are many decisions to consider when making any investment and one of these is how much investment risk you are prepared to take. This will be determined by a number of different factors.
Your appetite for investment risk will depend on your life stage and whether you want to grow your money over the long term or need to draw a regular income. Usually, your age and relative proximity to retirement will determine whether you’re investing for the short term (three to seven years), medium term (eight to fifteen) or long term (more than fifteen years).
What to invest your money in is a big decision. To make an informed recommendation, it is important for us to understand your financial circumstances, your investment objectives and expectations, including the level of risk you are prepared to take and that which you can afford to take.
As you approach retirement, or when saving for a specific goal such as the purchase of a home, you are less willing to risk losing your money. This is particularly true when markets are volatile, and the risk of capital loss increases. At this time, you might put a greater emphasis on investing in defensive assets, such as cash and fixed income.
If you want to invest for many years, you may be prepared to take on more risk in your investment portfolio. This means you’ll have time to ride out any short-term fluctuations in investment returns and benefit from the potentially higher returns offered by growth investments such as shares.
Whenever you make a decision – in everyday life or in investment – you face an element of risk. But if you understand the risks, you can begin to manage and minimise them. Risk is part and parcel of investing, and as such cannot be avoided. While most investors prefer to avoid as much risk as possible, some risk is needed to achieve higher returns. To discuss how we can help you create the investment portfolio that meets your goals, please contact us.