When investing, the essential factor is profitability, linked to a small or big risk. There’s a myriad of investment products available and each one as its own character, determined by running time and risk. Therefore, if you would like to invest with peace of mind, it is essential to find the products that match your profile.
Profitability and risk
You could distinguish different investment profiles. As a starting investor, it is better to determine your profile first by answering to interrelated questions.
- What is the profitability you would like to have?
- What risk are you willing to take to get that profitability?
If you are rather cautious and you think that security is very important, then your profitability will be rather low. If you are open to taking more risks, you will have a better chance of getting a higher profitability. By answering these questions truthfully and realistically for yourself, you will be able to get better advice from a professional investment advisor. Based on your investment profile certain products will or will not be recommended for you and then you can make informed decisions.
This is exercise is not exclusively for the starting investor appropriate, by the way. The more experienced investor can also benefit from revising and reevaluating his investment profile. Just as your phase in life its corresponding personal and financial situation, your investment profile could change drastically.
The first type of investor wants security. When investing, this type mostly wants security. His wants to take as little risk as possible. Products suitable for this type are for example, savings bonds and term deposits.
The second type of investor is cautious. This type does not need to know the profitability of his investments beforehand, but takes calculated risk to be able to benefit from market evolutions. This is why this type of investor has a chance to get more profit. Products like savings accounts, insurance products and term deposits offer security, but usually have a lower profitability.
The third type of investor looks for balance. This investor tries to get a high profitability and is prepared to take a few risks for that. However, balance between security and risk is very important for this type. These types often benefit from alternative investments like diamond.
The fourth and final type of investor is energetic. They strive for the highest possible profitability and are prepared to take big risks to achieve it. This type of investor feels right at home at the stock exchange market where certain shares experience big highs and lows.
If you are looking for the ideal investment, your starting point will always be determining your risk profile.