Your comfort level with risk
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Returns on property and shares can vary a lot from year to year. These investments generate the highest potential returns over the long term. Returns on cash and fixed interest, on the other hand, are more stable from year to year. But, over the long term, the returns on these investments are lower than that for property and shares. When investing you must consider your investment horizon and acceptable risk exposure |
Each of the asset classes - cash, fixed interest, property and shares - are associated with a certain combination of potential risk and returns. When you invest, you earn a return, which is the money you make on the investment. Risk is the possibility of losing part or all of the money you invest. The more the returns rise and fall, the greater the volatility, hence the higher the level of risk on the investment.
Investors seeking higher returns are generally prepared to accept higher levels of risk, and vice versa. When thinking about investing and your preference for risk and returns, here are some things to consider:
- Does the investment suit your needs and financial situation?
- How comfortable are you with rises and falls in investment returns?
- How long are you prepared to invest your money?