Every individuals income levels are unique and their risk-taking ability is not same. As every individual has different incomes, their expenses vary from each another.
Inspiring from successful investors is good, but we can’t rely on their investment strategy. This is because Legendary investors have higher risk-taking capability where the retail investors can’t take such risks.
Meaning of “Risk” – Risk can be defined as the fluctuations/volatility in the capital amount. That means there is a possibility of capital erosion. Though this is true, no asset class will make you “Zero”if you invest in that particular asset class. only some portion of the capital may erode and in some instances it will rebound if we stayed for the long term. In fact there is a saying- “Taking more risk ensures higher returns, taking lesser risk ensures lower returns”.
some investors are ready to take higher risk and they can tolerate the fluctuations in the capital. Suitable asset class for high risk takers are Stock Market, Crypto Currencies, Mutual Fund etc
While some investors are conservative and savy, They can’t bear the loss. Suitable asset class for this type of investors are- Fixed Deposits, Recurring Deposits etc.
In today’s digital world, everyone are making investments without assessing their risk profile. But the foremost thing one has to do before making an investment is assessing their risk profile.There are many risk-profilers available on online where one can get an overview of his risk profile.
If you are unfamiliar with your risk profile, consult a trusted financial planner who would guide you in assessing your risk-profile rather than on his benefits. You must enquire your financial planner on the incentives, commission pay-outs received from the investment advise and he should disclose his brokerage details as per the amfi(Association of Mutual Fund of India)and NISM(National Institute of Securities Market)norms. After confirming his commission details only, you can decide whether he is suggesting good investment product or not. This is also one type of risk profiling.
If you familiar with online risk profiling apps, assess your risk taking capability on yourself or take guidance from good financial planner(after confirming his brokerage on that product)