Saxo Group
Summary: Everyone experiences risk in some way every day. Most of us try to avoid risk when we can - paying bills on time to avoid fees, waiting until the lights turn green before crossing the road. Then there are those who don't avoid risk, they face it, and some even embrace it.
We each have our own approach to how we handle risk.In the context of long-term investing, it is critical to understand your risk profile, how it is calculated and the role your risk profile plays in generating wealth long-term.
Why is it important to have a risk profile?
SaxoWealthCare’s technology uses your risk profile to determine the ideal portfolio of stocks and bonds to help you achieve your life goals. Having the correct risk profile offers assurance that your money is being invested within your comfort levels.
How is your risk profile defined?
Before starting your SaxoWealthCare investment plan, we will create a profile for you to assess which investments are suitable for you. We take into consideration your investment knowledge and experience, your risk appetite, and your financial check-up. As a part of that process, we determine your risk profile by considering your risk tolerance, loss aversion, and your ability to take risk.
Risk tolerance is how much risk you would like to take in the long run. When markets are volatile, do you prefer preserving capital or do you aim for higher potential returns?
Loss aversion determines how comfortable you are when losses occur. Do you experience more fear when experiencing losses than you do when making gains? If yes, you are loss averse.
If you show loss aversion, SaxoWealthCare offers you the opportunity to add on the Portfolio Protector. Click here to learn more about it. It is free to add and can be removed whenever you please.
Your ability to take risk depends on a number of factors such as your age, time horizon, financial situation and investment objectives and goals. Generally, the younger you are, the higher your ability to take risk. The shorter your time horizon, the lower your ability to take risk. The more money you have, the higher the ability to bear risk.
What are the risk profiles for SaxoWealthCare?
SaxoWealthCare offers five risk profiles: Very defensive, Defensive, Balanced, Offensive, Very Offensive. More on this below.
Risk Profile | Approximate Bond Exposure (%) | Approximate Equity Exposure (%) | % Portfolio Protector Level (if switched on) |
Very Defensive | 80 | 20 | 95 – 92.5 |
Defensive | 60 | 40 | 90 – 92.5 |
Balanced | 40 | 60 | 85 – 87.5 |
Offensive | 20 | 80 | 80 – 82.5 |
Very Offensive | 0 | 100 | 75 – 77.5 |
If you activate the Portfolio Protector, you are not assigned a risk profile but an investment floor (shown in last column). The investment floor is the amount of money that you are not comfortable losing. The investment floor is not guaranteed, and you may lose more than your floor level. However, Saxo will do our best to avoid this from happening.
If your portfolio approaches your floor, your more-risky equity exposure is reduced and your less-risky bond exposure is steadily increased. Once markets recover, we switch your portfolio into more equities to benefit from the higher reward equities give you in the long run. For example, if you have a balanced risk profile and add the portfolio protector, your investment floor will be 85% - 87.5%. Thus, we calculate that you are not comfortable losing more than 12.5% - 15% of your account value. If your account value approaches 12.5% - 15% in losses, you will notice your bond exposure steadily increasing.
Generally speaking, the more equity exposure in your portfolio the greater the risk, compared to investing in bonds. This is because stocks tend to be more volatile than bonds. Saxo aims to use bonds to steady your portfolio should the markets turn.
How Do Find Out Your Risk Profile?
Simply complete the suitability test on the SaxoWealthCare platform. To learn more on how SaxoWealthCare can help you achieve your life goals, click here.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
