Is investing safe, and how to assess the risks?

When it comes to investing, the question of security often arises. Although investing involves risk, it also offers excellent potential for gain.

In this article, we will explore the key aspects to consider when assessing the risks associated with investing. Find out how to evaluate your risk tolerance and ability to bear a loss and choose assets that match your investor profile.

What is investment risk?

Investment risk is the probability of losing the amounts invested, either through lack of return or the loss of a significant proportion of the money invested.

The 3 levels of investment risk:

• High-risk investment: This strategy targets potentially high returns, but the invested capital is exposed to strong market fluctuations. 
• Medium-risk investment: You invest in products offering moderate potential returns, with a certain level of volatility.
• Low-risk investment: You invest cautiously in products designed to limit the risk of loss. As risk is lower, potential returns are also more limited. Low-risk products include fixed-rate funds and term deposits.
  
  

Choose assets that match your investor profile

Each asset class has its own level of risk. High-risk assets tend to offer higher returns and a more significant potential for loss.

The 3 main asset categories are:

• Equities
• Bonds
• Real estate

At Piguet Galland, we understand the importance of tailoring your portfolio to your risk profile. We build personalised portfolios that allow you to invest in assets that match your objectives and risk tolerance.

Assessing your risk tolerance as an investor

Risk tolerance is a crucial consideration when investing. Financial markets can be volatile in the short term, with high fluctuations in value. It is therefore essential to determine the level of risk you can tolerate.

To assess your risk tolerance, ask yourself these questions:

• How strong is my appetite for risk?
• How much do I know about the financial instruments I want to invest in?
• How much loss can I bear?

Ensuring the ability to withstand a loss

Before investing, ensure you have savings you can call on in case of unforeseen circumstances. If you expect to need this money in the next three to five years, keeping it in cash rather than investing may be a better option. Solid financial security will help you navigate the potential ups and downs of investing.

Finding the right balance between risk and return

As an investor, you can decide how much risk you are willing to take. It is a delicate balance between risk and potential return. By choosing the level of risk that suits you, you increase your chances of staying invested over the long term and achieving your financial goals.

If you’re new to investing, take the time to explore and understand the risks involved. Our team at Piguet Galland is here to help you assess your risk tolerance, determine your investor profile, and adopt an investment strategy that suits you.

Investing involves risk, but you can make informed decisions with a cautious approach and a better understanding of the risk involved. Assessing your risk tolerance, making sure you can withstand a loss, and choosing the right assets are essential steps to confidently investing your money.

Investing can be an exciting journey towards realising your financial dreams. At Piguet Galland, we put our expertise and experience at your service to help you achieve your financial goals.