I N V E S T O R S' P R O F I L E
When we discuss on investment, investors have to consider the RISK! Or the uncertainty of income/profit on their investment. But, is it not to invest is the best way to avoid risk? Actually, not investing your money is also risky. For instance, keeping your money under the mattress may invite losing money, and it might reduced our purchasing power when there is inflation in economic.
Risk and return have a direct relationship between them. Normally, the higher the risk, the higher the potential return. Hence, investing all your money in valuables that carry large returns, it may leads you to a financial trap if something doesn’t go as what you have planned.
Understanding the risks is useless unless you know what type of investor you are. The risk you can tolerate depends on many factors such as your:-
i. investment objectives- long/short term or the maturity period.
ii. the amount of money you have to invest.
iii. the size of your portfolio.
iv. and the time left for your investments.
Figure 1: Investors’ Profile / Type of Investor
Different instrument will expose investors to different level of risks, invest in stock market will lead to higher risk as compared to unit trust. But, normally it will compensate with higher return (even sometimes lost).
The best way to eliminate risk is by performing portfolio which mean, invest in different assets rather than put all your money in single asset for example, investors may invest both in capital and money market in order to profit from any economic changes they might have to face.
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