Finding an Investment Company That Matches Your Risk Profile

Finding an Investment Company That Matches Your Risk Profile

Different investment companies have access to different funds which may be beneficial in your quest to succeed. Each respective fund will have varying levels of risk, which means that you should be able to find a company which is wholly compatible with what you want to achieve.

Before you can even begin to think about investment companies, you need to try and determine the levels of risk that you can tolerate. Of course, you need to consider the fact that the more risk you can manage with your assets, the higher the returns which you could expect if things go well. This is the reason why micro-cap funds always have the larger profit margins than more well-established companies, and this is also why initial public offerings are very appealing to some.

The support mechanism of an investment company can be a good idea, as it can also stop you from making irrational decisions if things aren’t going the way you imagined them. Investments can be compared to a plant that needs to grow, and it can be difficult to wait even if there are spells when nothing appears to be happening or when an investment seems to be taking a turn for the worse. As the saying goes, good things come to those who wait – and it can be important to bear this in mind.

Remember, you might want to invest in a number of different ventures which have different levels of risk, meaning that larger proportions of your assets are in low-risk investments, whilst small percentages of your portfolio are placed into funds with a high-risk, high-reward ethic. Even though you might be trying to find an investment company that matches your risk profile, remember that this doesn’t need to represent your entire portfolio, and you can fluctuate, experiment and deviate a bit with the ventures that you follow.

Even if you do want to opt for funds which may put you at a little more risk than you may be comfortable with, there are some mechanisms which can act as a safety net should things fluctuate either way beyond your comfort zone. Known as stop-loss orders, these mechanisms take into consideration the price of shares when they were bought (A�1 each, in this example), and then allows an investor to set a percentage fluctuation to determine when the shares should be sold by a broker on the investor’s behalf. If a stop-loss order is placed at 20%, this could mean that shares would be sold if the price of stocks reached 80p or A�1.20, ideal if an investor wishes to focus on other investments whilst treating this element of the portfolio passively.

Everyone’s risk profile is different because everyone’s financial circumstances are different, and, if you are new to the world of investing, it could be worthwhile to play things safe.