Risk is Good!

The above statement will come to many of our readers as a very strong statement to make, which at first glance will be frowned upon.?This may especially be true for our older readers so let’s explain.

In general, risk is defined as the possibility of something bad happening.?This is why the average person will not be willing to take any risk with their investments but in doing so, some context towards risk is ignored.?

We all know that life is full of risks.?As an example, driving to work every morning implies risk-taking.?The fact is that if you want to reach your destination you have no choice but to get into that car.??What you can however control is who the driver of the car is, the condition of the car, how fast you will drive and what route you will take.?By doing so you control the risk, albeit taking it, to enable you to reach your destination.?If you understand these risks and take the appropriate quantity of risk, the taking of risks can be said to be necessary as it enables you to reach your destination.?

Investment risk is very similar.?Investors are willing to take on more risk, if they believe they will be fairly compensated for the additional risk. It is, therefore, reasonable to associate higher risk with a higher expected return. In order to achieve your investment goals, it is essential to understand your unique investment risk profile and take the appropriate amount of risk.?If you do not take the appropriate amount of risk, you might not achieve your investment goals at all.

Understanding your unique risk profile

Understanding your personal risk tolerance is a critical step to ensuring you achieve your investment success.?There are 3 elements that make up your unique risk profile:

·????????Risk required

The level of risk necessary for you to achieve your desired return, within the available timeframe

·????????Risk capacity

The level of financial risk you can afford to take.

·????????Risk tolerance

The level of financial risk you are emotionally comfortable with or willing to take.

Your unique risk tolerance and risk capacity may change over time due to life events and life stage cycles.?This may in turn have an impact on your current portfolio recommendation and may need to be reviewed and reassessed.

If you would like to determine your own risk profile then head over to cam.com.na and take our free risk assessment. One of our Sales and Channel support officers will then contact you and help you break down your results and determine which of our unit trusts meet your investment needs.