Tips for the Conservative Investor
Are you interested to start investing, but find yourself afraid of risk? Each investor is unique; he has his own financial goals, risk tolerance, product preference and priorities in life. A risk averse investor might not necessarily want to have the highest gain, and might prefer a more stable instrument that could generate good yields. Here are some tips for the conservative investor.
3 Tips for a Risk Averse Investor
1. Have a Financial Blueprint
First of all, my advise for a risk averse investor is to have a financial blueprint. A financial blueprint lists all your goals and steps to achieve this. Remember that this goal must be realistic. Sometimes, a low risk client gets swayed away by the crowd. If he is with a group of aggressive investors, he might find himself following their choices instead of knowing what works best for himself. If you have a financial blueprint, you forge your own path. You are aware of the specific steps you need to take, so the decisions you make have a solid foundation.
2. Know your options: Bond Fund or Money Market Fund
Second, know your options. Most low risk tolerance clients would prefer going into bond fund or Money Market Fund. Bond Funds are relatively safer. It is still subject to risk, but it has less risk exposure over Equities. Money Market Fund is similar to a savings account. Most people use this fund to park their investments, but you can utilize this to re balance your portfolio. Which goes to the third tip….
3. Allocate and re balance your portfolio
If you still want to be exposed to equities, go ahead. Fund allocation is actually up to you. You can allocate more money into low risk funds, and have a bit in equities. Keep allocating and re balancing according to the market and when you will need the money. Invest wisely!
