When determining your risk profile, ask yourself the following questions:
- What stage are you at in your life?
If you are young, generally, you can afford to take greater risks with a view to obtain higher returns in the longterm. If you are older, security will be an important factor.
- Is your goal short-term, medium-term or long-term?
In general, if you have a long term investment horizon, you can afford riskier investments. However, if you need money for a down payment on a house in two years time, you should not invest in high risk assets.
- What kind of 'money personality' do you have?
Some people are risktakers and some are not. Therefore, understand your attitude towards money and risk, before making any investment.
- Are you willing to accept short-term movements in the value of your investments?
If watching share prices go up and down upsets you, you should limit your share investments until you feel more comfortable with it.
- Are you prepared to accept higher risks for greater returns?
Generally, no risk means lower return, so try to find a balance you are comfortable with.
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