How to know your investor profile?

In this article you know the points you should take into account to determine what your investor profile is and use this information in your investments.

In this article:

  • What is the investor profile

  • How to determine your investor profile

In the investment world, being happy with our investments depends largely on making informed decisions. The key? Acquiring assets that align with your needs and goals. 

One of the first concepts we need to look at is understanding risk. Risk is the compass that signals the possibility that an investment will not perform as we think it will. 

In addition to risk, there are other factors to consider: How long are you willing to invest, do you need access to your money, do you intend to contribute frequently to your investments, and, above all, what are your investment goals? And, above all, what are the goals you want to achieve?

While it may seem like a daunting task, acquiring this knowledge is essential to choosing your investments wisely. Your ability to tolerate certain levels of risk, the length of your investment horizon and your financial goals all come together in one simple concept: your investor profile. This profile, in essence, defines you in the financial world and acts as the filter that guides your choices.

Not surprisingly, this profile does not remain the same for life. It changes and evolves over time, in tune with your growth and goals. Imagine a 19-year-old starting out in the investment world. His capital might not be as large, he might invest for several years, and he might tolerate higher risks. However, the same individual at age 50 will see a different picture: prudence and protection of accumulated assets will be priorities.

Here is a series of questions you can answer to help you define your investor profile

How old are you? This is fundamental to know the approximate time you could keep your investment.

Do you have experience investing? In general, more experienced investors tend to have a higher tolerance for risk.

What is your objective? Investing for retirement is not the same as investing for a vacation next year or perhaps to pay your children's tuition.

How long would you like to invest for on an ongoing basis? Knowing this information can help you understand which options might best suit your investment style.

Depending on your answers you can begin to realize how risk tolerant you may be, is your profile a conservative investor profile, that profile that prefers not to have stock price movements but is aware that your returns will not be that great either, or maybe you have a high risk profile? Like that investor who feels comfortable with the rise and fall of prices of his investments in order to have a chance to earn more. 

There are different types and names for investor profiles but they will always be related to risk tolerance, as an example, you can use the names conservative investor, moderate risk tolerance investor or high risk investor to denominate those profiles with low and high risk tolerance respectively.

In short, the investor profile stands as the north star in your financial world. Guiding you and shaping every choice you make.

*This is an illustrative example and does not represent an investment recommendation.