Risk profile reflects your behaviour in various scenarios and helps device a financial plan or investment portfolio that would help you to sleep well at night.
It is said that life is all about taking risks—if you never take risks, you will never achieve your dreams. We face risk in every walk of life, may it be the risk of an accident when we are travelling or the risk of losing job on which our family depends. When it comes to investments, it is no different story, but with some strings attached. It is more based not only on your willingness, but also on your ability to take risk—everything filters down to these two things, commonly known as risk profile of an investor.
Risk Profile
So what does your risk profile mean? Risk profile means gauging individual's willingness and ability to take risks. The main objective of risk profiling is simplifying the process of understanding attitudes towards investing and try to understand probable reactions to future events. For instance, when markets collapse, how do you react—whether you hold your position, buy more, or sell everything in panic. Everyone thinks and acts differently. Specifically, when it comes to making decisions, one's reactions tend to be significantly influenced by the attitudes, mindset, past experiences and current situation, etc.
This story is from the February 18, 2019 edition of Dalal Street Investment Journal.
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This story is from the February 18, 2019 edition of Dalal Street Investment Journal.
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