Risk Profiling: The money that’s been set aside for various purposes is put to work in a variety of ways. The level of risk that comes with various investment options varies. Investors’ tolerance levels with risk can vary widely (risk appetite).
There are also times when investors’ perceptions of how much risk they are willing to take differ from the reality.
Risk profiling is a method for figuring out how risk-averse an investor is. This is a requirement for advising investors on their investments. Understanding both sides of risk is essential for sound investment advice.
- Investor’s willingness to take on risk
- The level of risk associated with the various investment possibilities under consideration.
Instead of just asking, “How much risk are you prepared to take?” the investment advisor needs to assess the investor’s risk tolerance based on these criteria.
In addition, the advisor should think about the time horizon for the investment. Risk investments may not be suited if the investor’s objectives are primarily short-term.
Everything has a risk attached to it, even the bank that hold your life saving has a risk to fail. Stock Market, probably less risky than banks these days as the companies driving the economy is the base that creates the whole stock market.
Companies like Asian paints, Bajaj Group, Bharat petroleum, Indian oil, Giants of IT like Infosys, HCL, Wipro, all banks like Axis, ICICI, SBI, and the most trusted HDFC, Car manufacturing giants like Maruti, Mahindra, and the mighty Tata Group, not to forget the disruptor of all – RELIANCE. Do you think any of these companies will fail? Let’s just say for debate some will- but if you are invested in 50 companies and 2 will fail, 48 will take care of your money.
Also, not only equities, there are debt and fixed Income securities which is not impacted by stock market or economy fluctuations plus they give you higher returns than bank accounts and easily beat inflation.
BEST OF ALL – How about mix of both? For a new investor, who wants to try both, this is the best option.
There is something for everyone.