What Is An Investment Risk Profile
and How
Does It Work?

Before you begin investing, there is a risk profile assessment done to evaluate your willingness and ability to take investment risks. If you are new to investing - read on to find out how risk profile works.

All investments carry some level of risk, and your investments will go up and down in the short term. A risk profile assessment is like a personality quiz to determine what type of investor you are so that you can determine the types of investments that are suitable for you, and which ones to avoid based on your willingness to tolerate risk.

Ask yourself these questions:

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1. What is your investment goal?

Different goals will need a different investment approach to be able to deliver the investment returns you want, when you want it. For example, investing for 10 years for your child's education fund would involve a different strategy to planning for retirement in 30 years time.

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2. How much time do you have?

After setting your sights on a goal, you'll need to get realistic about the time you have (a.k.a. your investing horizon). If you still have 20 years to reach your goal, you may be able to take on higher risk to average out the losses and maximize the potential to make higher returns. However, if you only have 5 years, you may not have the time to wait for your investments to recover by the time you need the money.

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3. How much risk can you live with?

Imagine if you have 30 years ahead to manage your investments and have enough money set aside for emergencies and loan commitments. However the thought of losing money over your investment keeps you awake at night, then you should acknowledge that you are not comfortable with high risk investments.

It's a combination of all your answers to the questions above that will help you figure out your risk tolerance. As your risk tolerance will shape your investment decisions, knowing your attitude towards investment risks will help you make the right decision.

5 types of Risk Profiles

Your current risk profile is Conservative

You seek better returns than time deposits. You want to preserve capital as much as possible but are prepared to accept minimal losses.

Your current risk profile is Moderately Conservative

You seek better returns significantly better than time deposits. You are prepared to accept more than minimal losses for potential returns.

Your current risk profile is Balanced

You seek moderate capital growth. You are willing to accept moderate risks and losses for potential returns.

Your current risk profile is Moderately Aggressive

You seek higher capital growth and are willing to accept higher risks and losses, for the potential to get higher returns.

Your current risk profile is Aggressive

You seek aggressive capital growth and are willing to accept significantly higher risks and losses, for potential maximum returns.

However, not everybody falls into these standard classifications of aggressive, moderate, or conservative risk based on their individual risk tolerance. While it may not be clear what your own risk tolerance is, there's an easy way to get a personalized risk profile.

You can use the Maybank Goal-Based Investment to estimate your investing goals and outcomes. This tool can help you grow your wealth, prepare your retirement fund or save for your child's education fund. Depending on your risk profile, the Simulator will recommend a portfolio of Unit Trust funds which consists of the following four asset classes:

Fixed Income

These consist of government securities and corporate bonds which can be local or global, issued by developed nations or emerging economies.

Equity or Stocks

These are riskier investments consisting of shares and other securities which you can buy an ownership interest, either local, regional or global.

Alternatives

Refer to less conventional investments like gold and REITs.

Cash

Liquid assets like bank deposits or currency you deposit in a bank account.

If your goal has a more conservative risk level, it may assume a higher allocation to fixed income investments. If your goal has a more aggressive risk level, it may assume a higher allocation towards equities.

Knowing the risk you can tolerate is the first step to figuring out the investments that are best suited for your goals, Ultimately, this may benefit you in the long run as you invest in a way that is more in line with your risk appetite.

Want to find out your Risk Profile?

You can easily estimate your risk profile with Maybank by following the steps below.