Let's assess the risks of your investment together.
When it comes to investing, the question of security often arises. Although investing involves risk, it also offers excellent potential for gain. In this article, we'll explore the key aspects to consider when assessing the risks associated with investing. Find out how to evaluate your risk tolerance and ability to bear a loss and choose assets that match your investor profile.
What is investment risk?
Investment risk is the probability of losing the amounts invested, either through lack of return or the loss of a significant proportion of the money invested.
The 3 levels of investment risk :
- High-risk investment: You aim for a high return on the capital invested, but highly volatile factors influence this.
- Medium-risk investment: You invest in products where the expected return is lower but still has a degree of volatility.
- Low-risk investment: You invest reasonably in products that guarantee little or no loss. As the risk is lower, so are the gains. Low-risk products include fixed-rate funds and term deposits.
Choose assets that match your investor profile.
We have seen that each asset class has its own level of risk. High-risk assets tend to offer higher returns and a more significant potential for loss.
The 3 main asset categories are :
- Actions
- Bonds
- Real estate
At Piguet Galland, we understand the importance of tailoring your portfolio to your risk profile. We build personalised portfolios that allow you to invest in assets that match your objectives and risk tolerance.
Assessing your risk tolerance as an investor
Risk tolerance is a crucial consideration when investing. Financial markets can be volatile in the short term, with fluctuations in value that can be disconcerting. It’s essential to be honest with yourself and determine what level of risk you can comfortably tolerate. Remember, this is not a competition, so choose an approach that allows you to sleep peacefully at night.
To assess your risk tolerance, ask yourself these two questions:
- How strong is my appetite for risk?
- How much do I know about the financial instruments I want to invest in?
- How much loss can I bear?
Ensuring the ability to withstand a loss
Before investing, please ensure you have savings you can call on in case of unforeseen circumstances. If you expect to need this money in the next three to five years, keeping it in cash rather than risking it is probably a better option. Solid financial security will help you navigate the potential ups and downs of investing.
Balance risk and return
As an investor, you can decide how much risk you are prepared to take. It's a delicate balance between risk and potential return. By choosing the level of risk that suits you, you increase your chances of staying invested over the long term and achieving your financial goals.
If you’re new to investing, take the time to explore and understand the risks involved. Our team at Piguet Galland is here to help you assess your risk tolerance, determine your investor profile, and adopt an investment strategy that suits you.
Investing involves risk, but you can make informed decisions with a cautious approach and a better understanding of the risk involved. Assessing your risk tolerance, making sure you can withstand a loss, and choosing the right assets are essential steps to confidently investing your money.
At Piguet Galland, we put our expertise and experience at your service to help you achieve your financial goals. Investing can be an exciting journey towards realising your financial dreams, so explore the possibilities.