Risk and return on investment
There are many decisions to make about where to invest your funds. What is your current financial situation, your needs and objectives?
Working out your risk profile will help you to make these decisions.
- Set goals: To find out what your attitude to investment risk is, you need to understand what you want to achieve with your investments – you need to set your investment goals.
- Look at timeframes: You might be willing to accept more risk in the short term if the rewards are greater in the longer term. Risk may also be based on your stage of life. For example, a young single person may be more willing to make a higher risk investment than a retired person.
- Consider the stress factor: Usually, the higher the return, the higher the risk, and the lower the risk, the lower the profit. Would you be stressed if the value of your investments fell? Make sure you can sleep well at night when you’ve made your decisions.
- Plan for the future: You can’t totally avoid risk. If you decide to put your money into a secure savings account instead of an investment, you also risk not having enough money to meet your financial goals.
- Talk to a professional: Speaking with a qualified financial planner can help you to work out your goals, decide on your risk profile and choose an investment strategy that’s right for you.