Those who are looking for financial planning help in Perth are bombarded with unsolicited advice on a daily basis. At Approved Financial Planners, we don’t give advice on our blog, but we can educate consumers about their choices and what they may want to consider when looking for a financial advisor.
When we have an individual consultation with an investor, one of the most important considerations is their risk tolerance. We find out how comfortable a client is with risk so that we can create a financial plan that they can live with. A client who is uncomfortable with risk is going to be steered towards a more conservative approach. A client who is comfortable with risk will be steered into a more aggressive approach.
Generally, the higher the risk of an investment, the higher the potential reward. This is a fundamental of investment. However, some strategies are commonly used to shield even an aggressive investor from undue risk.
Long-Term Timeframe
Long term investments carry less risk because fluctuations in any market tend to even out if one waits long enough. This doesn’t work 100% of the time, but time can be considered to be a valuable asset in investing.
Honouring Risk Tolerance
If one of our clients is uncomfortable with the risk factor for any investment, we usually advise them not to go through with it.
Diversification
One of the fundamentals of financial planning and investing is to diversify assets by investing in different market sectors. The more markets one invests in, the less ill effects they feel if one market temporarily struggles. They are usually able to wait for that particular market to return to norm.
Education
Investors who educate themselves about investing and about the different markets and opportunities are usually in a better position to manage risk.
Approved Financial Planners
At Approved Financial Planners, we have been helping Perth residents work towards their financial goals since 2005. For an individual consultation, please call 08 6462 0888.
