We all are different. Some of us love summer. Some of us adore winter. Men are from Mars (and known for taking many more risks!) and women are from Venus (and usually much more predictable in their habits).
We will also approach certain scenarios very differently. You might gamble with the movie you are going to watch tonight, but will be very diligent in choosing the school your child goes to. Our decisions are ultimately driven by our thought processes and how we perceive risk or the danger of making the wrong decision.
All of the above determines your risk profile. Just like a personality test we are prone to fall into one of a number of buckets. From a conservative investor all the way to an aggressive investor might be somewhere between 0 and 100 points on a scale.
Knowing your risk profile is vital. This will give you a very “real” indicator of which investments you should rather avoid – note your risk profile might change over time so review it every now and then. Once you know your risk profile or score this should be used as the guideline when making any investment decision.
Every single investment has an element of risk – technically risk-free investments don’t exist. If someone tells you something is risk-free, be careful because it means they don’t understand the risks involved.
So before making a decision on what type of investment will suit you, it is important to see if the risk profile of the investment is higher than your risk profile. This is usually a bad idea and rather stay away from that investment.
Investments below your risk profile (the maximum risk you are willing to take) are in line with your requirements and those investments are safe to continue with.
The asset allocation or the combination of the various assets in the investment will determine the risk profile of the investment. The more exposure you have to growth assets (equity and property) the higher the risk profile of the investment – these investments tend to fluctuate greatly which will increase the risk of potential loss of capital. If, however, you stay invested in cash and bonds the risk profile will be much less.
WealthPro has partnered with FinaMetrica – an international renowned risk profiling company – to determine your risk profile for free. The process is very simple. All you need to do is :
• Register with WealthPro
• Complete ID Authentication (we need to verify your ID for security purposes)
• Establish your risk profile
• Complete 12 easy questions to get your score
Once we know your risk profile we will make recommendations and guide you as to what investments are suitable for you and which you should rather not participate in.
Take the quick quiz now to ensure that all future financial decisions you make are in line with your expectations and avoid any nasty surprises.