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How to Invest According to Your Risk Profile 

Written by R. A. Stewart

Your risk profile is a term you may hear from time to time from financial commentators. This is the amount of risk you are able to take when investing your money. There are several factors which determine what your risk profile is and the same profile is not applicable to everyone who invests because everyone’s personal circumstances are different.

It should also be pointed out that your financial portfolio could have a different risk-factor attached to them.

Here are the main factors which determine your risk-factor

  1. Your Personal Circumstances

If you have young kids then there is little room for risk in your portfolio apart from your retirement funds. Someone who is young and single can take more risks without being reckless. 

  1. Your Health 

This has a bearing on your plans if your health is so compromised that there are medical bills to think about. If this is the case then you might want to be a little conservative with your investing because the last thing you need is when it comes to cashing in on your investment only to find that you have less money than you thought due to a market meltdown.

  1. Your Age

At a young age you have more room for financial mistakes. This is because time is your friend. You have more time to recover from financial setbacks. This all means that investing in growth funds is a good option for you as far as your retirement fund is concerned. If you are saving for a vehicle and you have given yourself a 1-2 year timeline for this then investing a little more conservatively is the way to go. The last thing you want to happen is for the markets to drop just when you need the money for your car and for your savings to be less than you expected.

  1. Your Goals

Your goals or rather what you expect to do with your savings whether it be for a car, house deposit, overseas trip, or to build up your financial portfolio is a factor in determining which is the best option for investing your money. If you are investing to increase your wealth and have no set time as to when you need the money then you have more room for risk. If you are saving for something in particular then you have less room for risk.

  1. Your Debt levels

“A debtor is a slave to the lender” and if you have debt your first responsibility is to pay it off before you even consider saving for anything. Keep in mind that if you have debt then you have no discretionary spending money until that debt is paid.

  1. Your Timeline

The question should always be asked, “How will this affect my lifestyle if there is a market meltdown?”

This means that you should invest according to when you need the money. Here is a quick guide:

Timeline Time

Short-term: 12 months or less Savings account/conservative fund

Medium-term:1-5 years Conservative/Medium funds

Long-term 5 years+ Growth funds

About this article

This article is of the opinion of the writer and is not financial advice. You may use this article as content for your blog/website or ebook. 

Read my other articles on www.robertastewart.com

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Fear of Loss will kill your chances of prosperity

Fear of Loss will hinder chances of prosperity

The fear of losing money will cause people to play it safe by not stepping outside their comfort-zone and not investing their money for greater returns. 

Leaving your money in an ordinary savings account will mean that inflation will erode the value of your money yet that is exactly what a lot of people do. They are afraid to take risks.

Some of this fear comes from those who had experienced the crash of 1987, better known as “Black Monday” when portfolios were hit hard. Some people lost their life-savings and more tragically, a lot of the money which went down the drain was borrowed money.

In these situations, shares were worth less than the money borrowed to purchase them.

There are risks which are worth taking and risks not worth taking. It takes discernment to tell the difference.

I remember once (about 2001) I bought shares in Air New Zealand and they almost went bust, well they would have if the government did not bail them out. The shares dropped to a low of fourteen cents a share. I bought my shares in the company at around $2 a share.

This was the last time I bought shares in an airline. It was an expensive lesson. 

I have known some people who never invest their money for fear of loss; they cannot handle the volatility of watching their balances go up and down yet they have no problem with buying their weekly lottery tickets. If they had deposited that same money into their kiwisaver then these people would have a fortune waiting for them once they reach the age of 65.

“You make your choices and your choices make you.”-Jim Addison, Scottish Pastor

It is all about choices.

The choices you make today will determine which choices you are able to make in the future.

If you have been sensible and joined a retirement scheme and contributed to it all of your life then this choice will give you more options in your later years.

Ask yourself these questions, “What action can I take today which my future self will thank me for?”

There will not be a single person who reaches the age of 65 or whatever the retirement age is in your country, who will regret ever joining  and contributing to a retirement fund.

It is everyone’s responsibility to get a financial education. This will help you to make right choices for your money. Apply what you have learned which are applicable to your personal circumstances.

Getting over your fear of loss will enable you to grow your wealth rather than just leaving it in the bank where inflation will steal the purchasing power of your money.

About this article

You may use this article as content for your blog, website, or ebook.

The contents of this article may not be applicable to your personal circumstances, therefore discretion is advised.

Read my other articles at www.robertastewart.com

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FRIENDS WILL SHAPE YOUR FINANCIAL DESTINY

Your friends may be detrimental to your wealth

Written by R.A.Stewart

The people you associate with could well be having a detrimental effect on your financial future and though you may not notice it at the beginning, but eventually their influence could pull you down to mediocrity. Let’s look at an example from the animal kingdom.

If you locked a sheep on its own in a paddock, it will try to find a way of escaping to find greener pastures but if it has company it is quite content to remain in the same paddock with its friend.

People are like that; some will conform to the standards of others and as far as financial matters are concerned will take on board what others are saying, and eventually will adopt the same kind of mentality towards finances.

There are different kinds of lifestyle habits which are incompatible to a financially successful lifestyle; drinking, smoking, and eating takeaways regularly are habits which will shorten your life and drain you of your finances.

Your choice of friends will influence your attitude towards money; if you associate with gold digger’s who believe people with lots of money are selfish, then you will be encouraged to spend your money rather than save and invest it.

This is what I am saying in a nutshell:

“The people you choose as your friends will set the standards for your life.” It is important that you keep good company because if you spend too much time with people with bad attitudes, some of their money attitudes will rub off on you. It has been said that you are the average of the five people you spend most of your time with. So who are you spending most of your time with? 

I have known a lot of people with terrible money attitudes. One is “You cannot take it all with you” as if you are going to pass away within the next week or so. What they are doing is to cling on to every excuse they can hold on to for their lack of financial literacy. They will try to make others who are in a better financial shape feel guilty by making them feel stingy or selfish.  This makes them feel less guilty about their own financial situation.

It is better to spend time with Financially literate individuals and in this way you will pick up some of their financial knowhow. You sure will not learn anything from those who friends are the type of people who go out on Saturdays or have no problem with breaking the law then they will encourage you to follow suit and a lot of people do in order to fit in and abandon the values taught by their parents.

The bottom line is, “If you keep company with financially ignorant people then you will become like them.

“He who walks with wise men shall become wise but a companion of fools will be ruined.” Proverbs 13:20

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