Out of Sight, Out of Mind, rather than pretending to love, it is better to get to know first before deciding to invest.
Mostly, when we want to invest, we are more tempted by the lure of high yield potential, without knowing our ability to hold the risk level of the lessening investment capital. In fact, every investment product has inherent risks, and this needs to be well understood by potential investors, especially for the beginner investors. So, our ability to hold the inherent risk in the product is often referred to as the investor's risk profile.
In order to find out our risk profile, we can fill in the questions which are contained on the provided questionnaire according to your condition. The results of our answer will determine our risk character as an investor, which is generally divided into 4 categories, namely:
If our risk profile is a conservative, we do not really care about the potential returns as long as the initial capital is not reduced or lost when the funds are used at any time, which means our investment period is relatively short. The types of investment products generally are deposits, bonds with a tenor of less than one year, and money market mutual funds.
With profile risk balance, we start to understand about investing, but we are still careful in taking risks and looking for a few opportunities from our investment in the medium term. Products such as medium to long term bonds, or fixed income mutual funds generally fall into this category.
Our understanding of financial and investment market conditions is good enough and we prefer to achieve growth on investment in the medium term with minimal risk. Products such as mixed mutual funds or investment portfolio which consist of stocks and bonds and these will be included in this risk profile.
We already understand the conditions of the financial market and investment products and we choose high growth investment in the medium to long term, and we can accept fluctuations in our investment in the short term. The principle of high risk means high return has already become the basic principle for investors in this category. Investment products such as stocks or equity funds with higher risk are preferred for aggressive investors.
What will be the impact if this risk profile introduction stage is not carried out?
If we do not carry out the stages of the introduction stage of this risk profile before, then there is a possibility that we will buy an investment product not according to the character and our investment objectives. For example, if our investment objective is to seek security and do not want price fluctuations, then investment products such as stocks will not be appropriate, even though at that time stocks provide high returns. Conversely, if we seek long-term growth value and are willing to accept price fluctuations, then it would be less appropriate to choose conventional products such as deposits.
Well, it is clear that it is important to recognize our risk profile, so that we love our investment even more. Do not forget, investment does not stop when we have bought an investment product. Investments also need to be considered regularly. This is to ensure the return and investment objectives, product types, and our risk profile that are still suitable.