Investment & risk

           Safe investing with high returns does not exist; if you are looking for higher yields, you will have to accept higher risk and vice versa, if you are keener to save investing, you will have to be good with lower returns. This relationship between risk and return is recognized by investors as risk/return trade-off.
Since majority of investors are similar in all looking for the highest possible returns, there is a big difference among them regarding risk tolerances. Much of the difference in risk tolerance stems from time horizon. That is, an investor with a short investment time horizon is less able to withstand losses. The remainder of the difference in risk tolerance is attributable to the risk investor can afford and is willing to accept, and investors experience. Volatility can be unsettling for many investors and they are more comfortable when they can avoid it.
 
           To help determine your risk profile, which will help you make the right investment mix of safe investing and return for your situation, you should answer yourself the following questions.

Safe Investing And Financial Situation

How would you describe your current financial situation?

• Few financial commitments looking to accumulate wealth for the future (e.g. young single).
• Established financial commitments, not a lot of money at the moment but want to save more (e.g. young family).
• Well-established, finances are under control; want to save more and considering funding retirement.
• Preparing for retirement, thinking of downsizing home and strategies to release retirement funds.
• Retired, depend on investments and keen to maintain lifestyle.

How would you describe your present income?

• More than sufficient to cover my living expenses (I am able to save a certain amount every year).
• Sufficient to cover my living expenses (I am not able to accumulate my savings).
• Not sufficient to cover my living expenses (I need to supplement my income with returns on my investments).

How would you best describe your income expectations over the next five years?

• I expect my income to rise well ahead of inflation (through promotion, career developments, etc.).
• I expect my income to keep pace with inflation.
• I expect my income to fall (as a result of retirement, reduced working hours, etc.).
• My income fluctuates from year to year (such as self-employed investors).

Safe Investing And Time Horizon

What time horizon would you be comfortable with when investing?

• No specific time horizon, prepared to incur a loss upon redemption
• Less than 1 year
• 1 - 3 years
• 4 - 5 years
• 6 - 7 years
• 8 - 10 years
• 11 years or more

How long do you expect to take future withdrawals from your account?

• No specific time horizon
• I plan to take a lump sum distribution
• 1 - 3 years
• 4 - 5 years
• 6 - 7 years
• 8 - 10 years
• 11 years or more