Whether you are yet to invest or you have a diverse portfolio, if you’re earning an income the chances are you are already an investor!
This is because we all receive superannuation in Australia which besides being your savings for retirement, is also an investment.
Your attitude towards investing can be observed even in your approach to other areas in your life, mainly in your risk appetite. It’s important to note how much risk you can tolerate and where you’re currently at in life, which will significantly affect how you choose to invest your money.
For this reason, it’s important to depict what kind of investor you are or want to be.
That way, you can start planning your future through various investments to ensure you have a sizable nest egg once you reach your golden years.
Choosing Between The Different Investment Risk Profiles
If you have some money set aside that you’d want to invest, knowing the kind of investor you are will help you choose the right investment approach that suits your risk appetite and financial goals.
When determining this, you should also consider your current stage of life and the kind investment returns you are expecting.
Investment risk profiles are classified into three main types:
1. A Conservative Investment Profile:
This option mainly suits those who need to access their money in the short term, (ie. less than three years). For this reason, many pre-retirees who are close to their golden years choose to take a conservative approach to their investment portfolio.
This option may also suit you if you are wanting a lower risk of loss and are willing to accept lower returns in exchange for this stability.
Conservative investors usually invest their money in defensive asset classes such as, fixed interest and cash.
2. A Balanced Investment Profile:
This option works best if you are wanting moderate returns over the long term. This profile is classified as having a medium risk appetite, which means you’re prepared to take some risks to get the returns you want.
Balanced investors are usually more willing to invest in mostly growth assets like shares but add in a few defensive assets to their portfolio as well.
3. A Growth Investment Profile:
This investment profile is best if you are wanting to achieve high returns over the long term and if you are willing to accept the high risk for potential losses during that time.
While you may achieve some losses in the short term, a growth investment portfolio will likely achieve higher returns in the long term.
Should Your Investment Strategy Change Depending on Your Life Stage?
As you get older, your preferences, financial situation, and long-term goals change according to the circumstances and experiences you go through.
If you invest as early as your 20s, you’ll likely have a considerably different perspective on risk and rewards compared to those nearing retirement.
Having a salary increase, starting a family, or buying a house will also likely change your objectives, which means you’ll need to review your investment profile and strategy to ensure you have enough money to support your desired lifestyle.
Determining the kind of investor you are as early as possible will help you decide the investment strategy you need to achieve your objectives. By consulting a financial advisor about your options for retirement investing, you can save enough money to secure your future for life after work.
EJM Financial Services has a team of financial advisors offering retirement advice and financial services in Melbourne. We provide our clients with simple, tailored solutions to help them achieve their financial goals.
Contact us today to find out how we can help you make your money grow!