How to work out your investor profile

Julie Brownlee, Fsp Invest, 17 Jul. 2015

Tags: investor profile, risk profile, investment risk, type of investor, investing,

If you want to start investing, it’s important you understand your investor profile first. By knowing this, you’ll be able to make the best choices about what investments to make.

So what investor profile suits you best?

Read on to find out…

The basis of your investor profile

Your investor profile relates to how much risk you’re comfortable taking on with your investments. It’s important to only invest in financial instruments you’re comfortable with.

Have a look at the chart below. It shows you the risk associated with investing in different financial instruments.

Risk of different financial instruments

The four main types of investor profile

By reading through the following investor profiles, you’ll be able to see what type of financial instruments suit you best…

1. Timid investor profile
This investor profile means you’re very risk averse. You’d rather keep your cash in the bank than risk it on anything.

But you risk letting inflation eat away at your cash. You need to explore low-risk investment opportunities, such as government retail bonds.

2. Cautious investor profile
This investor profile means you prefer to avoid risk. You’ll likely be wary about investing on the stock market.

Financial instruments such as unit trusts are something to consider.

3. Shrewd investor profile
This is the investor profile where many investors who want to put their money to work on the stock market fall under.

You want to invest in shares and you may include bonds, unit trusts and exchange traded funds (ETFs) in your portfolio.

A shrewd investor understands the risks you take on give you the chance of making better returns from your investments.

4. Adventurous investor profile
This investor profile suits those who want to trade risky geared financial instruments as well as investing in shares and other instruments.

You need to have a high tolerance for risk, and use strict risk and money management to succeed.

So there you have it. How to work out your investor profile.

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