The most important thing you need to know before you start investing—your risk profile!

Fsp Invest, 05 Dec. 2013

Tags: risk profile, know your risk profile before you start investing, how to work out your risk profile

Johnny put a lot of money into small cap shares at the beginning of the year.
He was hoping to get rich in no time at all by taking a huge risk with his money.
But after he made the decision, he sat and watched the charts all day long and obsessed over the price movements of the shares he bought.
He started losing sleep over it and slacking off at work.
One day, one of the small caps he poured money into suddenly went into liquidation.
This freaked Johnny out so much, he had a complete breakdown and had to take time off work to recover from the trauma of losing a large chunk of his investment.
Here’s what you need to do if you don’t want to end up like Johnny.

Know yourself before you start investing
Looking back, Johnny realised he wasn’t comfortable taking that risk at all. 
He doesn’t usually take risks with anything else. 
So the truth is, small cap shares just weren’t the right investment option for him. 
He might have been more comfortable with something a little less risky…  
Something like a retail savings bond. 
He could have avoided his disaster if he’d just worked out his risk profile before he started investing!
How to work out your risk profile
You need to work out your risk profile so you can find the products that suit you best. 
Aggressive investors are more suited to equities. 
But if you’re a more conservative investor, you should stick to debt-based instruments like bonds. 
If you’re somewhere in between, you should choose a mixture. 
To work out your risk profile, all you need to do is fill out a questionnaire online

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