Is your investor personality static across all goals and times?
Do you think you understand your risk appetite? And are you managing your portfolio accordingly?
Now, consider this: your appetite for risk is dynamic and it should be!
It should vary based on:
(i) What your goal is?
(ii) How far into the future your goal is?
(iii) Your current financial stability, demographics, etc.
Therefore, your risk tolerance can be high for a goal 15 years down the line, and moderate to low for short to medium-term goals. This is how you should truly assess your risk tolerance and determine the type of risk appetite you can afford for each goal.
Using this understanding of risk appetite with goals at different future times, and aligning your investment strategy accordingly, will help you create an optimal portfolio. Such a portfolio can benefit from growth opportunities for long-term goals while protecting capital and generating returns that at least beat inflation in the short to medium term.
Apply this knowledge to make decisions that serve you optimally.
Happy learning! Happy investing!
