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Understanding The Risk Profile:


Risk is an integral attribute of any financial instruments.Most of the times this factor is ignored and only return factor is considered.E.g if you watch the business channels where investors ask questions to experts.Caller asks a question and expert makes a calulation based on 15% compounded annual returns, suggest few funds and ho gaya..but as an investor we should aware that higher returns are always coupled with higher risk and one should know its own risk profile before investing in any financial instrument.

 Imp Factors To Be considered:

Age Group:

Lower is the age higher is the risk taking capacity and vice versa for older age.

Investing horizon:

Capital erosion is quite possible for shorter term in the equity.Losses and profits are not permanent in equity till it is booked.so longer is the time horizon,better for your investment.

Income source:

One need to have a check on the income source before investing…it will be risky for investing in real estate via home loans if income source is unstable.

Market understanding:

Investing in mutual funds or in direct stocks all depends upon the individual market understanding.I think most of the investors prefer to invest through combination of both.

Liquidity:

One should decide the investment pattern after considering the liquidity in nearer term..

Risk is everywhere in the life,but before entering the financial jungle I think its better to judge self whether I am Tiger or Rabbit and accordingly should take financial decision..isn’t it?


Category: Mutual Funds

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