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Investment risk profile
The reason investing can feel intimidating for some is because there are so many options, with each one requiring different levels of knowledge or support.
To narrow down your options, you first need to get clear on your investment profile – that is, who you are as an investor, and that starts with three things: Objective, Timeframe and Risk Appetite.
This is the ‘why’ behind your desire to invest. What are you trying to achieve and what is your end goal?
Maybe you're investing to build up a house deposit, or you’re planning a comfortable retirement, or you’re looking for strong returns you can access when you need it.
Once you know your goals, you’ll be set up to choose the best investment options for you.
Are you investing for a goal that is way into the future, or are you hoping for some quick cash in the short term? Understanding your timeframe – how long you want to hold onto your investments, or when you need the money by – will make certain investment options more suitable than others.
For example, property is usually a medium to long-term investment that we hold onto for around 10 years on average, while cash is a classic short-term option if you need to access the income within three years.
You can use the table as a guide for working out which investments could suit your timeframes.
Timeframe |
Years |
Examples of common investments based on timeframe |
|---|---|---|
Short term |
< 3 years |
Cash – eg. term deposits, high-interest savings accounts, or cash managed accounts |
Medium term |
3–10 years |
Property, bonds, income funds, growth funds |
Long term |
10+ years |
Shares, bonds, gold, equity funds |
This is the ultimate deciding factor. Some options will give you a modest but reliable return (such as the interest earned in a high interest savings account), while other investments are the epitome of ‘high risk, high reward’ in that you could potentially make a significant amount of money, but you could also lose it all.
Stock trading is often considered high-risk – particularly if you’re trying to buy and sell frequently, rather than hold onto a company to see it grow.
While the high reward may be appealing, it needs to align with your values and your financial situation.
Are you going to stay awake at night worrying about your investment? If so, maybe go with something a little bit more secure like a managed trading fund where your investment is pooled with others and diversified to protect the individual investors.
Hot tip
Diversity really is the spice of life – and the key to protecting your investments. A portfolio that has a mix of investments and investment types – can help you to keep building wealth even through tumultuous times.
When you’re ready to invest, it’s important to educate yourself, seek expert advice and consider diversifying with:
Different types of investment classes: shares, bonds, property, currencies, or cash
Different industries: like health, banking, or property
Multiple regions: holding Australian and international assets can reduce exposure to poor economic performance in a particular country (but exposes you to currency risk)
Different investment types carry different levels of risk and require different levels of investment: always do your research!
The information set out above is general in nature and has been prepared without taking into account your objectives, financial situation or needs. Before acting on the information, you should consider whether the information is appropriate for you having regard to your objectives, financial situation and needs. By providing this information ANZ does not intend to provide any financial advice or other advice or recommendations. You should seek independent financial, legal, tax and other relevant advice having regard to your particular circumstances.