Investment Fundamentals Part 1

Risk vs return

Whilst your investment objective is to maximise return, this is always subject to risk and there is a chance you could lose money or not make as much as you expected. Investment risk can be due to factors such as inflation, taxation, economic downturns or a drop in a particular market.

As a general rule, the larger the potential investment return, the higher the investment risk and the longer you need to remain invested to reduce that risk. The risk involved with an investment can be managed by matching it appropriately with the length of time you have available to invest and your tolerance towards volatility or fluctuations in returns.

Diversification

An alternative option to manage or reduce investment risk is diversification. This strategy involves investing your money across a range of different investments. The exact mix you choose will depend on:

  • your financial objectives
  • the amount of time you have available to invest
  • your personal tolerance for risk

Owning a diverse range of investments can help you achieve smoother, more consistent investment returns and the more you diversify, the more you can reduce your risk. For example, you could invest in:

  • different asset classes (cash, fixed interest, property, shares)
  • more than one investment within each type (invest in several different industries and companies when investing in shares)
  • more than one type of fund, and more than one fund manager, when investing in managed funds
  • inside and outside of superannuation

If you would like to know more about risk vs return or diversification, talk to a Roberts & Morrow Financial Services adviser. They can give you more detailed information on the best approach for your situation.

General Advice Warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

Recent Articles

Update on Drought Assistance

16th August 2019

RAA – Rural Assistance Authority https://raa.nsw.gov.au Farm Innovation Fund The Farm Innovation Fund is part of the NSW Government’s Drought Strategy and... Read More

Planning Opportunity - Carry forward (Catch-up) Concessional Contributions

08th July 2019

From 1 July 2018, individuals with total superannuation balances below $500,000 have been allowed to carry forward the unused... Read More

1 July 2019 Retail and Industry Fund Insurance Changes

25th June 2019

From 1 July 2019, the Protecting Your Super reforms will commence. It’s important to understand how these changes will... Read More

Important ATO changes to payroll procedures

25th June 2019

Single Touch Payroll (STP) is an ATO reporting obligation which requires employers to report employee payroll information, including superannuation,... Read More