Get the right balance between risk and return
Being comfortable with your investment strategy is just as important as achieving your investment goals.
It's about understanding your risk tolerance, and getting the right balance between risk and return.
Naturally, everyone wants the biggest and best returns. However, higher returns tend to involve investing in higher risk options. And that generally comes with higher levels of volatility.
Higher volatility means you may achieve some great long-term earnings, but you may also experience negative returns from time to time that result in dips or fluctuations in your earnings.
Two questions you should ask yourself
1. How long do I have to invest?
The longer you have to invest, the more likely it is that you will be able to ride out any ups and downs in the market.
| Short term (less than 3 years) |
Medium term (3 to 7 years)
|
Long term (7+ years)
|
| Higher risk options may not suit you. |
A conservative or balanced option might suit you best. |
You probably have time to ride out the ups and downs of a higher risk option. |
2. How comfortable am I with risk?
Essentially this question is about knowing how you would feel if your investment took a hit.
Ask yourself this... If my investment dropped in value, even temporarily, would I worry or lose sleep over it?
If your answer is 'yes', then you're probably not suited to a high risk option.
Get expert advice
We have a team of qualified financial planners who can help you work out your risk profile and recommend a suitable investment strategy.
Advice can be provided quickly and easily over the phone or in person. There’s no obligation, and in most cases, no charge either.
Find out more about our advice service.
Get the right balance between risk and return
Being comfortable with your investment strategy is just as important as achieving your investment goals.
It's about understanding your risk tolerance, and getting the right balance between risk and return.
Naturally, everyone wants the biggest and best returns. However, higher returns tend to involve investing in higher risk options. And that generally comes with higher levels of volatility.
Higher volatility means you may achieve some great long-term earnings, but you may also experience negative returns from time to time that result in dips or fluctuations in your earnings.
Two questions you should ask yourself
1. How long do I have to invest?
The longer you have to invest, the more likely it is that you will be able to ride out any ups and downs in the market.
| Short term (less than 3 years) |
Medium term (3 to 7 years)
|
Long term (7+ years)
|
| Higher risk options may not suit you. |
A conservative or balanced option might suit you best. |
You probably have time to ride out the ups and downs of a higher risk option. |
2. How comfortable am I with risk?
Essentially this question is about knowing how you would feel if your investment took a hit.
Ask yourself this... If my investment dropped in value, even temporarily, would I worry or lose sleep over it?
If your answer is 'yes', then you're probably not suited to a high risk option.
Get expert advice
We have a team of qualified financial planners who can help you work out your risk profile and recommend a suitable investment strategy.
Advice can be provided quickly and easily over the phone or in person. There’s no obligation, and in most cases, no charge either.
Find out more about our advice service.