How do I determine my risk profile as a beginner investor and should I take on more risk in my earlier years? - Seedly
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Seedly PFF 2019

Asked by Anonymous

Asked on 02 Mar 2019

How do I determine my risk profile as a beginner investor and should I take on more risk in my earlier years?

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Tai Zhi
Tai Zhi, Chief Investment Officer at Autowealth
Level 4. Prodigy
Answered on 05 Mar 2019

I have shared this during last Saturday's panel.

The worst nightmare for investors who just got started is to take excessive risk, suffer a catastrophic loss, lost confidence and then never ever invest again.

(1) Start low risk, build confidence before gradually increasing portfolio risk

Investors who just got started should go low risk first. Be patient. Go through a market correction to feel the market fluctuations and better understand your emotional resilience towards market volatility (ie fluctuations). When you gain more confidence and experience, gradually increase your portfolio risk to accelerate your wealth accumulation.

(2) Invest broadly to diversify away risk

Do not be too narrowly focused, diversify broadly so that specific market developments like U.S.-China trade tensions will not cause a catastrophic loss.

Therefore, try to start off with a globally-diversified portfolio of stocks and bonds with a higher allocation to bonds. For example, you may consider starting with the AutoWealth Conservative Portfolio (60% global government bonds 40% global stocks) before switching to a portfolio with higher risk.

Check out our blog posts for other useful investment insights and concepts: https://www.autowealth.sg/blog/

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You need to see if you are able to stomach the volatility of some investments. Will you panic sell if the price drop? You should definitely take more risk in your earlier year as you will have lesser dependants.

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Christopher How
Christopher How
Level 4. Prodigy
Answered on 02 Mar 2019

A simple litmus test is, how much risk will cause you to not be able to sleep well at night?

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