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There are several important steps once you have decided to start saving for your retirement. The first is to stop waiting and get going with the easiest way to be successful to start a periodic investment plan to pay yourself first. The second involves establishing a Relationship With Your Investment Advisor that you can trust to look after your best interests and help you protect and grow your savings. No doubt, one of the first activities any competent investment advisor will start with after getting to know you will be to determine your investor profile.
Your Investor Profile
This is the key to allowing you to maximize your ability to grow your savings while ensuring they are well protected so you can sleep at night. It is the investor profile which gives the investment advisor the guidelines for Your Ideal Asset Allocation. Many people who answer an investor questionnaire for the first time do not see the connection behind risk and return. Over time and with experience, the link is made between the fact that there are an infinite number of ways to reach your investment objectives and each path is as different as you are an individual.
Discover Your Tolerance for Risk
Most investors agree, they want the highest returns possible and don’t want to take any chances that their capital might decrease. Oh yeah, every quarter their statement should be filled with good news. Sound familiar, btw check out How to Read Your Investment Statement when you have a minute. But seriously folks, the key to a useful investor profile is to understand what risk you are willing to take and still be able to sleep soundly at night. Some questions revolve around your financial stability, annual revenue, net worth, value of your savings. Other questions offer a qualitative point of view:
- What would you do if your portfolio lost 10% over the next quarter?
- Would you be willing to gain 20% annually if it means you could lose 16%?
- What kinds of investment products have you held in the past? and,
- Do you understand what stocks and bonds are?
Then there are questions relating to your objectives:
- How long before you expect to use your savings?
- Do you expect to make a significant withdrawal before then?
- Over what length of time with your withdrawals be made?
A Productive Process
In all 10-12 questions, if this is this first time you have gone through the exercise, expect it to take a good hour. If the person who walks you through the questionnaire wants to understand your tolerance for risk it good take longer. Consider this time well-spent if your intention is to Take Responsibility for Your Investment Returns. The only time that an investor profile may not be necessary is for somewhat who wants to avoid all risk and is only looking for guaranteed products like certificates of deposit and guaranteed investment certificates. Their only risk is beating inflation to hold onto purchasing power, that’s a whole other post.
What did you learn when you completed your investor profile? If you haven’t done this yet, what are you waiting for? Let us know if we can help you make this important discovery.
Author: Robert
