The investment strategy you choose is very much dependent on your attitude to risk. So the starting point should be to understand where you are on the “risk curve”, i.e. are you risk positive or risk averse. We have listed the broad categories of investors by risk below.
Your investment objective is to preserve the current value of your capital. This means that you are prepared to accept low overall returns in exchange for security. Such a portfolio is suitable for investors wishing to invest for the short term, which should be, generally regarded as less than two years.
You are unwilling to see a reduction in your capital even in the short term. Your aim is a high level of capital security over a one-year investment horizon. Guaranteed capital security is your prime concern. A large proportion of your portfolio would consist of cash deposits and high-quality fixed interest securities providing a long term and secure income stream.
Your investment objective is to maintain stable returns over the medium term, whereby security of capital is of major importance. You will tend to seek higher returns where possible from investments providing high security of capital and low investment risk.
You are a typical investor who seeks to establish a well-balanced medium to long-term investment strategy to combat the effects of inflation and taxation. Security of investment is sought through the construction of a well-balanced investment portfolio, and the spreading of funds across a broad range of quality Investments. The investment strategy must satisfy income needs and provide for a fair rate of return.
You are very concerned about the effects of inflation, taxation and seeking security through a balanced investment portfolio containing a broad spread of quality investments for the medium to long term. A higher percentage of growth orientated investments are acceptable as the need for income is low.
You are motivated by the quest for real growth of net worth over the short to medium term. Well aware of the risk/reward ratio and is prepared to accept higher levels of volatility and risk to obtain higher capital growth. You will usually be prepared to accept some forms of speculative investments and the options of gearing into investments to accelerate growth.
Now that you have determined the level of risk you are comfortable with, you can consider an investment strategy to suit your needs. See our Investment Strategies section.
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