Things change. Situations change. People change. In investing, your risk profile and overall investor personality changes by nature over time, as you gain experience, confidence and a lot more knowledge.
That’s why re-taking investor personality tests are important.
If it remains the same, then there won’t be any impact to your investing journey. But what happens if it changes? In that case, there are 3 things that you should do.
#1 Understand the impact
Have all the changes in your life made you more comfortable with taking risks with your money? Or do you now want to protect what you have even more?
Your new risk profile is key to understanding how your current situation affects your comfort level with risk. It lets you see the products that you can consider putting your money into, which may not be the same as those from before.
Remember that risk and return potential have a direct relationship. In general, the more risk you’re willing to take with your money, the higher your profit might be, and vice versa.
#2 Assess your portfolio
The next thing to do is to see how your new risk profile affects your current portfolio.
Are you now able to choose from investment products with a higher risk suitability and more potential returns? Or are you unwilling to take on the same amount of risk as before, even if it means that you will probably earn less from your investments? Which of your assets are affected by the change?
The answers to these questions will determine your actions for the final step.
#3 Choose the next move
This is the point where you’ll need to decide what to do with the investment products in your portfolio that don’t match your risk profile.
Should you pull your money out and put them into matching products instead, or will you keep your money there regardless of what this could mean for the risk that you face, and the potential returns you could get? You’ll have to decide what the best move is for you and your money goals.
This moment is also a good time to rebalance your portfolio so it can continue to help you reach your goals efficiently.
Moving forward, your new risk profile should be one of your major basis for deciding if you should put money in an investment product or not.
If these 3 easy-to-follow steps are not enough, you can always consider ‘Seek professional help’ as the 4th.