Types of Investors – Based on your risk profile – All you need to know
The risk profiling process will give an output report about risk tolerance. In addition, this report will tell you what type of investor you are.
Types of Investors Based on Your Risk Profile…
A doctor prescribes medicine only after a proper diagnosis, right?
As the medicine consumed has some risk associated with it.
Similarly, most of the investments have some risk associated with them, apart from government bonds.
So, it is a must for all of us to measure our risk profile first and then decide the asset allocation based on that risk tolerance report.
Generally, there are 5 types of investors for the purpose of selecting investment asset classes.
- Very aggressive investor.
- Moderately aggressive investor.
- Balanced Investor.
- Moderately conservative investor.
- Very conservative investor.
Very Aggressive Investor…
This type of investor can invest up to 80% of his investment surplus in risky assets like equity mutual funds and stocks.
In addition, with a balance 20%, he can invest in low-risk assets like PPF, debt funds, gold, bonds, etc.
Moderately aggressive investor…
This type of investor can invest up to 60% of his surplus money for his financial goals in risky assets like stocks and equity mutual funds.
In addition, balance money can be invested in low-risk assets like debt funds, PPF, SSY, gold, bonds, etc.
Balanced Investor…
This type of investor can invest up to 50% of his surplus money for his future financial needs or goals in high-risk assets like stocks and equity mutual funds.
In addition, he can invest balance in low-risk assets like PPF, SSY, bank fd, gold, bonds, etc.
Moderately conservative investor…
This type of investor can invest up to 30% of his surplus money in high-risk asset classes like shares and equity mutual funds.
In addition, balance funds can be invested in other low-risk financial assets like PPF, SSY, Bank Fd, gold, and bonds, etc.
Very Conservative Investor…
This type of investor can invest up to 10% of his surplus money in high-risk asset classes like shares and equity mutual funds.
In addition, balance funds can be invested in other low-risk financial assets like PPF, SSY, Bank FD, gold, bonds, etc.
Conclusion…
Risk profiling, once done, doesn’t mean that you will remain in that profile for life.
In addition, doing this process once in a year or two is a good process.
However, you should be aware that, in spite of being an aggressive investor, you should not invest more than 30% of surplus money in high-risk assets for financial goals that are less than 5 years away.
Similarly, though you belong to the very conservative investor category, do not stick to 10% equity asset class for your financial goals, which are very far away, like retirement goals.
Read about Debt Fund Types: Afer Sebi Categorisation…
Also read Risk Priling Process—All You Need to Know…
And read about asset allocation and its importance…
Also read about How to pay less interest on your home loan?…
And read about debt funds—all you need to know…
Also read about Pradhan Mantri Fasal Bima Yojana…
