This explains why smart investors typically have a diversified portfolio that includes several different types of investments. Although shares and property are generally considered to be higher-risk investments, even more conservative investments like bonds can experience short-term losses. Whatever your risk appetite, you should always consider both risk and return before making decisions about what to do with your money. Conservative: willing to accept lower returns for a higher degree of liquidity or stability.Moderate: willing to endure short-term loss for the prospect of better long-term growth opportunities.High: willing to risk losing more money for the possibility of better returns.However, investors expect to be compensated for taking on this additional risk and should realise that taking on more risk doesn’t guarantee higher returns. The more risk an investor is willing to take, the greater the potential return. The relationship between risk and return underpins all financial decisions. Saving for a holiday or a deposit on a home is quite different from investing for your retirement. Investment objectives: be clear about why you’re investing and when you think you’ll need to withdraw your money, as well as how long you need the money to last. Income: people who earn more money and have a higher disposable income can typically afford to take greater risks with their investments. Older investors with a shorter investment timeframe may be more cautious as they’ll need their money to be more readily available and have less time to recover from a loss. Your age, income and investment objectives all help determine your risk appetite.Īge: generally younger investors with a longer time horizon to invest are more willing to take greater risk with their money to earn higher potential returns.
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