Risk Appetite

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You will know that all investing involves some sort of risk.

 

Use these risk profile descriptions to see which category you fit into, before you start investing yourself.

Find out your own risk appetite profile using this risk questionnaire from Charles Schwab.

Low risk investor

In general, low risk investors prefer knowing that their capital is safe and they’re not comfortable investing in equities. They would rather keep their money in the bank. Low risk investors are unlikely to have much experience of investment beyond bank accounts. They will usually suffer from severe regret if their decisions turn out badly. Low risk investors with time horizons of ten years or more typically have portfolios with a majority of bonds and cash, with little exposure to equities or other higher risk investments. Low risk investors need to understand that their caution can mean that their investments may not keep pace with inflation, or that may fall short of their investment goal.

Low-mid risk investor

In general, low-mid risk investors would prefer not to take risk with their investments, but they can be persuaded to do so to a limited extent. They would prefer to keep their money in the bank, but they may realise that other investments might be better over longer term. Low-mid risk investors may have some limited experience of investment products, but will be more familiar with bank accounts than other types of investments. Low-mid risk investors can often suffer regret when decisions turn out badly. Low-mid risk investors with time horizons of ten or more years typically have portfolios with a majority of bonds and cash, but with some exposure to equities and other higher risk investments.

Mid risk investor

In general, mid risk investors understand that they have to take investment risk to meet their long-term goals. They’re often more willing to take risk with at least part of their available assets. Mid-risk investors may have some experience of investment, including investing in products containing higher risk assets such as equities and bonds. They can usually make up their minds on financial matters relatively quickly, but they still suffer from some feelings of regret when their decisions turn out badly. Mid risk investors with time horizons of ten years or more typically have portfolios with a mix of higher risk investments such as equities and lower risk investments such as bonds and cash.

Mid-high risk investor

In general, mid-high risk investors are willing to take on investment risk and understand the nature of the long-term risk/return trade off. They’re willing to take risk with most of their available assets. Mid-high risk investors are typically experienced investors, who have used a range of investment products in the past. Mid-high risk investors will usually be able to make up their minds on financial matters quite quickly. While they can suffer from regret when their decisions turn out badly, they can accept that occasional poor outcomes are a necessary part of long-term investment. Mid-high risk investors with time horizons of ten years or more typically have portfolios with a majority of higher risk investments such as equities, but that also contain bonds and cash.

High risk investor

In general, high risk investors want the highest possible return on their capital and are willing to take considerable amounts of risk to achieve this. They’re usually willing to take risk with all of their available assets. High risk investors typically have substantial amounts of investment experience and will typically have been managing their own investments. High risk investors have firm investment views and will make up their minds on financial matters quickly. They do not suffer from regret to any great extent and can accept occasional poor outcomes without much difficulty. High risk investors with time horizons of ten years or more typically have portfolios made up primarily of higher risk investments such as equities, with little in bonds and cash.

Source: Vanguard Investing