Skip to main content Skip to search

Archives for February 2019

Understand Your Risk Profile

Here’s how to better understand your risk profile

Whether you’re getting into investing for the first time, or looking at how you might expand your existing investment portfolio, it’s important to understand your risk profile. Once you have this key insight, discovering the kinds of investment that will help you meet your goals will be more straightforward.

What is investment risk?

The risk when you make any investment is that you won’t get the return you’re hoping for, or worse, that you might lose your investment completely. You’ve heard the saying, ‘no risk, no reward,’ and this is exactly where that comes from.

High risk versus low risk

When you’re making a higher-risk investment, you’re looking for a higher return or more growth. But, there’s more chance of losing your money, or of seeing short-term fluctuations through market changes. A lower-risk investment generally avoids a ‘negative return’ or a loss of your investment, but will usually deliver lower returns.

Of course, you could opt for a shoebox of money under the bed for a zero risk situation. But even holding on to cash has dangers too, namely that inflation will increase and your stash will decrease in value.

Your investment goals

Before making any investment, it’s essential to set your goals. To do this, you’ll need to understand the following factors:

  • How long are you looking to invest for?
  • What is your overall financial position
  • The type of returns are you hoping for?
  • Do you need access to your money during the investment period?
  • What is your level of investment experience and insight?

Building a diverse portfolio

When you begin to create a portfolio of investments, it’s a good idea to combine different kinds of investments with different degrees of risk. This will help to balance the risk you’re assuming, but this can be a technical process, and it’s best to talk to a professional in the planning stages.

Talk to us to better understand your risk profile.

Read more
Have you got your super sorted?

Have you got your super sorted?

When you’re employed, your employer makes compulsory contributions to your superannuation. When you work for yourself as a sole trader, or you’re in a partnership, making super payments isn’t mandatory. But, it’s still an important thing to consider.

Retirement savings contributions are there to set you up in retirement. Generally, investing money into super will give you better investment returns than just putting it into a bank account. Plus, because the money is effectively locked away until retirement, there’s no temptation to dig into it in the meantime.

Chances are you’ve worked for an employer at some point, and have an existing super fund to add to. If you’ve never worked for anyone, it’s probably time to set up a fund. You can make regular contributions or make lump sums less frequently, to suit your cash flow. Contributions that you make will still benefit from tax savings, and these can mount up.

Another thing that’s very handy for the self-employed and generally offered through your retirement fund is insurance. Your fund may offer you life insurance and income protection insurance. Make sure that you take the time to really understand these policies, as the payout amounts may not offer enough money to replace the income you earn through your business. You may want to source an additional policy as a top up.

If your business is a company and you employ staff, you are responsible for making super payments for eligible employees. There can be serious penalties for failing to do this, so take the time to fully understand your responsibilities.

Stirling Proactive Accountants can help you and provide advice including contributing to your super, starting a pension or creating a SMSF.  Contact us for more information and to get started.

Read more