What is your investment profile and why is it important?

Your investment profile helps us ensure your investment strategy is always suitable for your goals.

Your investment profile defines what type of investor you are and is made up of two key areas:

  1. Your investment timeframe

  2. Your risk profile

Asking questions about these 2 areas helps to ensure that your investment strategy is suitable for you and that you don’t take on too much risk.

How do you work out my risk profile?

When clients sign-up to Stockspot they complete an online questionnaire to work out what portfolio strategy will be most appropriate.

The questionnaire considers your goals, investment experience, comfort with risk (ups and downs) and investment time horizon and whether you have any high interest debt. 

Assuming they have high interest debt under control, our clients are recommended one of the 5 Stockspot portfolios, which range from conservative to high growth strategies.

For example, if you indicate you’re less comfortable with risk (ups and downs) and/or investing for the shorter term, you’re more likely to be matched to a conservative investment strategy with a higher weighting to defensive investments (bonds and gold) and less to growth investments (Australian and global shares).

On the other hand, if you indicate you’re more comfortable with risk (ups and downs) and/or investing for the longer term (5+ years), you’re more likely to be matched to a growth strategy, with a higher weighing to growth investments (Australian and global shares) and less to defensive investments (bonds and gold).

Why timeframe is important

Investing is about time in the market.  The longer your investment timeframe, the longer you have to withstand any ups and downs along the way. 

If you’re investing for the long term ie. 5 or more years, you have plenty of time on your side for your portfolio to grow, enjoy the compounding of returns and recover from any market dips. With a longer investment timeframe you can afford to take more risk.

If you’re investing for just 3 years, you have fewer years for your portfolio to grow, enjoy the compounding of returns and recover from any dips along the way. With a shorter longer investment timeframe you should take less risk.

For example, we have many clients saving for a home deposit, keen to earn a better rate than leaving it at the bank, so they are choosing to invest. They’re likely to need that money in 3 to 4 years. Due to the shorter investment timeframe a more conservative strategy is appropriate. 

When is it appropriate to change strategies?

When any of your personal circumstances change, such as your financial circumstances, goals, investment timeframe or comfort with risk, you should review your investment profile to make sure its still appropriate for you.

Similarly, as you move through different stages of life and your desire for capital protection vs growth changes, it’s also a good time to review your strategy. 

We review each client’s investment profile annually so that it’s updated with any relevant changes. This keeps your investment strategy up-to-date and keeps you on track to reach your goals. It also means you don’t need to stress about continually checking that you’re not taking on too much risk, or too little.

When isn’t it appropriate to change strategies?

When markets rise or fall, it can be tempting to change your investment strategy to chase the best performing investments or avoid underperforming ones, which is a form of market timing. 

Changing your strategy in response to market movements or performance can end up throwing you off-track from reaching your goals.

If your personal circumstances haven’t changed, then you should sticking with your existing investment strategy that’s been matched to your risk profile, timeframe and your goals.

Changing strategies too frequently can harm your returns and lock in capital gains that could be deferred until later. 

Automated rebalancing also helps to ensure you continue to take the right amount of risk along the way.

Set a goal to stay on track

As your adviser, we’re here to help keep you on track with your investing goals. You can contact us any time to talk about your specific needs.

You can also set-up a personalised using the goal tracker feature in your Stockspot dashboard. 

Find out how Stockspot makes it easy to grow your wealth and invest in your future.

Founder and CEO

Chris has been vocal in calling out the industry 'Fat Cats' and is known for telling it as it is. He was an inaugural member of two Advisory Committees for the industry regulator ASIC, and was previously a fund manager at UBS. He holds a Bachelor of Commerce (Co-op Scholarship) from UNSW.

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