How can you determine your risk profile?
In its essential features, you can actually do this yourself. It makes more sense, however, to work out your risk profile with an advisor. This is because an investment strategy should be matched to your own investment plans, and aspects such as the savings rate and desired cash reserve should be taken into account.
What factors play the most important role in a risk profile?
The most important factor is your investment time horizon. This mainly depends on the goals you’re pursuing. It’s one thing if you’re a young person saving up to buy a house or setting aside money for your pension. It’s something else again if you’re only a few years away from retirement. As a rule: the more distant the horizon, the higher the risk that you can accept. Another rule: the more risk you can accept, the more equities you should hold in your portfolio. They may involve more risk, but in the long run they promise the greatest potential returns.