MISMATCH OF FUND’S RISK PROFILES WITH FINANCIAL GOALS

Matching your fund’s risk profile with your investment objectives is an important determining factor for investment success.
Investors need to first identify their risk appetite before a suitable portfolio can be built.
By identifying the level of risk that they are comfortable in taking, financially and emotionally, they can then decide the types of funds that are appropriate for them.

However, a common error that investors make is not assessing their risk profiles properly.
Because of this, investors tend to buy funds that do not match their actual risk profiles. For example, for conservative investors, their primary goal would be to achieve regular income.
As such, they should not select aggressive funds but instead go for balanced or bond funds.
Conservative investors may not have the temperament to withstand the high volatility of equity funds while investors who are looking to achieve high capital growth over time may not be able to fulfill their long term investment goals by investing in income focused funds.

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Unit trust investors need to ensure that they are investing with the proper mindset to ensure they have a realistic perspective of their investments.

Having the proper mindset when investing in unit trusts will allow investors to obtain a realistic perspective of their investments. Due to misconceptions about investing, some investors may be disappointed when their expectations and needs are not met. Investors who have a realistic expectation to their investments are more likely to achieve their long-term financial goals.