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Financial Planning

Managing your investments

Investing your money is an effective way to build your wealth.

However, investing is intrinsically linked to taking risk. In fact, investment risk is defined as the chance you will either lose or make money on an investment.

As all investments come with varying degrees of risk, it is important to recognise your appetite for risk and build a portfolio that suits your risk tolerance so you can sleep at night.

There are several factors that measure risk tolerance:

  • Desire to take risk - Some investors enjoy the inherent uncertainty of investing and are inclined to take on high-risk investments. More common however is an aversion to the stress that a large fall in an investment’s value can produce.
  • Financial capacity to take risk - A couple with a new baby and a mortgage will have a considerably different capacity to take risks than a single person just starting out in the workforce.
  • Your need to take risk - This is tied to your investment time frame. If you are 30 years old and planning 35 years ahead for retirement, you will probably be happy to accept greater risk, as short-term volatility is smoothed out, to achieve your goals. On the other hand, if you are nearing retirement, you’ll probably not want to risk losing your money as there isn’t the luxury of time to recover from losses.

Risk and return

With greater risk, there is the opportunity for greater returns. Different types of investments, or asset classes, have greater risk and the possibility of higher returns. There are four main asset classes:

  • Shares (also known as equities)
  • Property
  • Fixed interest
  • Cash.

Each asset class has individual characteristics and carries a different level of risk and return to suit a range of investor types.

Minimising risk

While risk is an unavoidable part of investing, there are steps you can take to minimise your exposure to unintended risk through diversification and where possible, making longer-term investments.

What type of investor are you?

Understanding what type of investor you are, and therefore what types of investments are appropriate to you, is all about your personal circumstances and your attitude towards investment risk.

How a financial planner can help you

A financial planner can help you understand your risk profile and build a portfolio of investments that matches your risk profile and your investment objectives.

Getting the right advice

Contact us to arrange a free, no-obligation initial consultation with Calm Wealth.

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The information on this page has been provided by Consultum Financial Advisers (Consultum) ABN 65 006 373 995, AFSL No 230323. It is general advice only and has been prepared without taking into account your particular objectives, financial situation and needs. Before making an investment decision based on this information, you should assess your own circumstances or consult a financial planner. Examples are illustrative only and are subject to the assumptions and qualifications disclosed.

Credit Union SA may refer members to Calm Wealth Management Pty Ltd ABN 85 645 323 913 and its financial advisers, who are authorised representatives of Consultum. Consultum is part of the IOOF Group. Credit Union SA does not accept liability or responsibility for any acts, omissions or advice provided by Consultum or its authorised representatives.

Credit Union SA receives up to $1,500 from Consultum when members are referred to and obtain financial advice from authorised representatives of Consultum.