Get ready for risk
Defensive, aggressive – what’s your risk profile?
Creating a portfolio is all about managing risk and reward – and finding the right balance between the two is one of the most important steps you’ll take on your investing journey.
Remember, every investment carries some risk, whether it’s a volatile stock or a “safe haven” asset like gold. So, creating a portfolio isn’t about avoiding risk entirely – you can’t – but you can understand and manage the risks and build a portfolio that matches your taste for risk.
Your risk appetite says a lot about what type of investor you are. If market fluctuations make you queasy and you’re not comfortable with the possibility of losing your capital, you’re probably a defensive investor. If this sounds like you, investing in bonds should be on the menu, with smaller portions of stocks and non-traditional investments.
Over time, a more cautious portfolio won’t return as much, but you will have stable long-term growth, without the headaches of taking on more risk.
More risk, more returns
On the other hand, if you’re keen to take a big bite out of the market and can stomach some ups and downs along the way, you’re the aggressive investor type. You’d be at home having more stocks in your portfolio, even dipping into foreign equities, oil or other alternative investments.
Why put more risk on your plate? Simple – for more reward. Over time, an aggressive portfolio can bring higher returns. Just be sure you’ve got the appetite for it.
Twenty pounds of headlines
Creating a portfolio doesn’t happen in a vacuum – risk is always present. Anything from global headlines to breaking business news can move financial markets with dizzying speed and a knock-on effect on your investments.
If you’re a defensive investor, you’ll be best prepared for these risks, with assets like government bonds, gold or foreign currencies far from your main market creating a “safe space” for your money.
Profiles in courage
Aggressive investors always face risk, whether it’s from a world event headline or something as simple as an analyst’s downgrade of your favourite stock.
But while you’re intrepidly chasing opportunities, don’t forget to take a page from the defensive investor’s playbook and diversify your portfolio with some safe haven assets to hedge your riskier bets.
Whatever type of investor you are, learning to manage risk is key to creating your portfolio – whether you want it to preserve your capital, maximise your returns or anything in between.
You can learn more about risk management and investing in this Saxo webinar.
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Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.