What type of investor am I?
All investments are designed to make a return and are subject to risk. This means that, as well as making money, there's also a chance that you could lose it. You might also think of risk as the possibility that your investments don't achieve your financial objectives. As a general rule, the bigger the potential investment return, the higher the investment risk and the longer the suggested investment timeframe.
How comfortable are you with risk?
Before investing you need to decide how comfortable you are with investment risk and how much risk you are prepared to take to achieve the returns you want. This is often referred to as your 'risk profile'.
How comfortable would you be with short term fluctuations in the value of your investments? Understanding how the different asset classes work can be a big help here. You don't want to lie awake worrying about your investments, so understanding your risk profile can help you get a good night's sleep.
You might want to do two risk profiles - one for your super and one for your other investments. Why? Because superannuation will generally be a longer term investment and your timeframe has a major bearing on which investments are more appropriate.
As a general rule, the bigger the potential return, the higher the investment risk and the longer the suggested investment timeframe.
For example, if you are investing to save for a house deposit in the next twelve months you will probably be less willing to risk a short term loss. But if you're investing your super, and not looking to retire for 15 years or more, you might be in a position to ride out short term fluctuations in your investment value in order to aim for bigger returns .
What to consider next
Speak to your financial adviser or choose an option here:
The information contained in this document is based on the understanding Colonial First State Investments Limited ABN 98 002 348 352 AFS Licence 232468 has of the relevant Australian laws as at 1 July 2009. This document is not advice and is intended to provide general information only. It does not take into account your individual needs, objectives or personal circumstances. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. Product Disclosure Statements (PDS) for products offered by Colonial First State are available from colonialfirststate.com.au or by contacting us on 13 13 36. You should read the relevant PDS and consider whether the product is right for you. Past performance and awards are no indication of future performance.