Which type of investor are you?
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Low Risk – Lower Return Investment
The most common fear is of the chance your investment will lose money. However, there are many investments that can all but guarantee your money will be safe.
Of course by taking low risks you will also lose most of the opportunity to earn a larger return in exchange.
US Treasury bonds and bills for example benefit from the full faith and credit of the United States, making these issues the safest in the world. Bank Certificates of Deposit (CDs) from a federally insured bank are also very secure.
Again with this low risk comes lower return on your investment. After taxes and inflation there is often very little real growth.
Medium Risk – Medium Return Investment
The majority of investors fall into the medium risk bracket. Every individual investor needs to find their own level of risk, one that they are comfortable with after analyzing the balance between risk and return.
It means carrying a portfolio you are confident in and this level of risk is individual. No two investors will have the exact same risk – return comfort levels.
This is an area we pay very close attention to when recommending a custom level, individually tailored portfolio to our clients.
High Risk – High Return Investment
Every level of risk is a very personal decision for each investor. Younger investors for example can afford higher risks as they will have more time to recover from poor choices.
This is not true of older investors who may be close to retirement, who will not want to be taking too many risks with their retirement fund, as there is less time to recover from any significant losses.
Experienced investors often focus more on high risk investments as these can and often do lead to greater financial rewards in shorter periods of time, although this is not recommended for everybody.
Instant Return – Regular Return Investment
Instant or regular return investments are ideal for anybody of any age who is looking to make a substantial investment in return for regular, solid monthly returns.
This may appeal to somebody who is planning a long retirement or for example an investor who has received a large inheritance or who has sold a successful business, and wants to make this capital work in a practical and regular way.
Hands off Investment
‘Hands off’ investments are investments that require no input at all from the investor. This is what the majority of investors are looking for.
Hands off investments can be either low, medium or high risk.
These types of investments are suited to anyone from retiree’s who don’t want the hassle of having to do or manage anything, to younger investors who simply don’t have the time to get involved.
Hands On Investments
Other opportunities are available for investors who do have spare time on their hands and a desire to be involved. Property development and small businesses are all examples of hands on investments where a client can take the time to become involved in every aspect of their investment.
They often produce good returns in exchange for the time and effort also invested. The negative side is that sometimes these investments will be affected by prevailing market forces which can be unpredictable and vary between regions.
A military coup, for example, may see a tourist industry slow down but could also inspire confidence in a country’s industrial investment sector.
These are all issues we research and consider for our clients in advance of any investment advice we provide.
Young investors with high incomes can benefit greatly from long term investment strategies. Clients who do not need short term or regular payments can make very profitable investments in projects that may take more time to come to fruition.
An example of this is land banking or commercial property investment. Investments that are measured in decades are often very fruitful if carefully selected.