What sort of investor are you?

Before you invest, you need to understand your time horizon and how you feel about risk.

In a nutshell:

• You're a conservative investor if you don?t like taking risks and are happy to invest your money for 3+ years whilst it grows steadily.
• You're an aggressive investor if you don?t mind taking risks and you are happy to invest your money for 7+ years with a view of higher returns.

Most investors are somewhere between these two. Before you categorise yourself, answer the following questions.

What is my time horizon?

Ask yourself, “How long do I intend to invest my money before I need to access it?”

This is essentially your time horizon, and it is a key factor when making your investment decisions.

Investment markets move up and down over time, and the value of your investment will move with them. For example, if you want to access your funds in the short term, you might prefer investment options that have less variability in return.

What is my attitude towards risk?

Risk is associated with the up and down movement (volatility) of the market and the potential for negatives returns. It’s very important to understand how you feel about risk.
 
If you don't like taking risks and are happy to invest your money for 3+ years whilst it grows steadily, then you are more likely to be a conservative investor.

If you don't mind taking risks and you are happy to invest your money for 7+ years with a view of higher returns, then you are more likely to be an aggressive investor.

You can also ask yourself, "Am I comfortable with reveiving low or negative returns in the short-term in order to obtain higher returns in the long-term?"

Or, would you be more comfortable receiving moderate but consistent returns? This is commonly referred to as the trade off between risk and return.
 

What sort of investor am I?

An easy way to answer this question is to use the What investor style am I? illustrator.

Otherwise, once you’ve worked out your time horizon and know how you feel about risk, you can look at the diagram below showing the different sort of investor profiles. Can you see where your time horizon and attitude to risk fits? If you need more help, talk to your financial planner about your investor profile.