Welcome back to the “Assets” learning path!

After you have assessed your goals and life situation in the first module, the question now is: How do you want to invest your assets? Studies show that women often proceed more cautiously when investing than men and prefer less risky forms of investment.

Not every investment strategy is suitable for every investor. In addition, different asset classes offer different potential returns and are associated with correspondingly higher or lower risks. 

A clear situation analysis is therefore crucial to determine your investor profile. Important aspects include your return expectations, time horizon and approach to risk – in other words, how much risk you can objectively take on (risk capacity) and how much you are willing to take on (risk appetite). 

Together, these points constitute your risk profile.

Defining your investor profile: return expectations, risk profile, time horizon

Your investor profile describes the conditions under which you want to invest. It consists of three central elements:

  1. Expected returns: What are your financial goals?
  2. Risk profile: How much can you afford to lose if the markets develop negatively in the short term (risk capacity)? But also: How comfortable are you with market fluctuations (risk appetite)?  
  3. Investment horizon: When do you need the invested money? In other words, how long can you do without it?

These points should always be considered together. Only then can you gain a coherent picture of which investment strategy or strategies are suitable for your individual situation. Depending on your investment needs, different investor profiles and investment strategies may be appropriate for you.

How do you determine your risk profile?

Your risk profile covers your risk capacity and risk appetite.  

Risk capacity (objective):

Your so-called “loss capacity” is calculated based on objective aspects. This determines whether you can endure a certain loss without jeopardizing your accustomed standard of living.

In addition to your existing assets and liabilities, recurring and one-off income and expenses also play a role here.

 

Risk appetite / risk tolerance (subjective):

Your risk appetite or risk tolerance determines whether you are willing to accept potential losses or tolerate short-term fluctuations in the value of your investments. 

Questions such as the following may help determine your risk tolerance:

  • Which types of investments are you interested in?
  • Which values are important to you when investing, e.g. stability, flexibility, growth?

Your personal attitude also plays a role in investing. Some people want as few fluctuations as possible, while others are more willing to accept fluctuations in pursuit of long-term goals.

Risk categories at a glance

For clarity, risk profiles can usually be divided into three categories:

  1. Low risk (or: conservative): Stability and ability to plan are often the priority
  2. Moderate risk (or: balanced): a combination of security and growth
  3. High risk (or: growth-oriented): focus on long-term development, acceptance of fluctuations

Which category suits you depends on your personal situation, expectations and goals. However, in accordance with our “UBS Wealth Way” advisory approach, your assets are not assigned to a single investor or risk profile. Instead, we will work together to determine how to allocate each portion of your assets, according to the three key strategies (liquidity, longevity and legacy), and the appropriate level of risk for each of your investment needs..

Anna’s tips: investment tips for every risk profile

  • Think in terms of time periods: The longer your investment horizon, the more you can put short-term fluctuations into perspective. For short-term goals, stability is often more important.
  • Rely on diversification: Broad diversification helps to distribute risk, regardless of your risk profile.
  • Stick to your plan: Frequent, emotionally driven adjustments can make it difficult to maintain an overview. Review changes consciously and impartially.
  • Get assistance if you want it: A conversation with professionals can help to better understand your risk profile, goals and suitable solutions.
  • Residual risk cannot be removed altogether: This is why you need a strategy that works for you even in turbulent times. 

Examples of suitable asset classes for each risk profile

Depending on your risk profile, different asset classes are suitable. In practice, they are often combined to cover various objectives and spread risk. What matters is not just the asset class itself, but how it is used and for what time horizon. 

Classify asset classes, do not consider them in isolation

Each asset class follows its own rules and carries different opportunities and risks. What’s important, therefore, is not the individual investment, but the overall portfolio. Depending on the objective, time horizon and risk profile, different asset classes may be suitable in line with the three key strategies (liquidity, longevity and legacy). This makes it clear which investments have which purpose.

The next module covers developing a concrete investment strategy based on this.

Anna’s glossary: the most important asset classes explained

Clients ask – Anna answers

Good to know

Women’s Wealth Academy

Women who actively take part in financial decisions increase their chances of achieving financial security and are more optimistic about their future. Take your finances into your own hands.

Because a personal conversation is worth a lot

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