5 Investment Risk Profile

One of the first steps that needs to be taken before starting an investment is to determine the risk profile.

Risk profile is a reflection of how an investor strategizes, especially in identifying the right investment product.

There are at least 5 categories of risk profiles that can be determined based on financial goals, availability of funds, investment period, as well as return expectations and tolerance for market fluctuations/volatility.

1. Conservative

• Very cautious in placing capital.

• Prefer the safety of investment funds over the opportunity for value accretion followed by risk.

• Have little or no investment experience.

• Investing short-term, usually less than 1 year, with a budget below 10% of monthly income.

• Suitable investment products are money market mutual funds and government (fixed rate) bonds.

2. Moderate

• Already has some experience and tolerance for fluctuations in investment value.

• The investment goal is for passive income while still considering the safety of the funds.

• Investing medium-term 1-3 years with a larger budget.

• Suitable investment products are fixed income mutual funds and corporate bonds.

3. Balanced

• Have sufficient experience and are ready to accept higher growth and decline in investment value (around -15% to +15%).

• Desire capital growth with medium risk.

• Suitable investment products are mixed mutual funds, low-risk equity funds, and blue chip stocks.

4. Growth

• Desire long-term growth in addition to passive income.

• Can accept large growth and decline in investment value (around -20% to +20%).

• Suitable investment products are mid-cap or growth stocks, equity mutual funds that are dominant in these types of stocks, and ETFs.

5. Aggressive

• Highly experienced in investing and have a high tolerance for market volatility.

• Oriented towards long-term wealth growth.

• Placing >50% of monthly income into investments and ready to accept significant changes to the portfolio.

• Suitable investment products are highly volatile small-cap stocks and derivatives (options and futures).

Disclaimer: The content is made for educational purposes, not a recommendation to buy or sell a particular stock. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (OJK).