We all have a built-in tolerance for risk. This determines the kinds of investments we’re comfortable with, and the kind of returns we’re likely to reap.
Which of the following describes you best?
I am risk averse
For me, risk is a monster to be feared and avoided at all cost. I prefer cash deposits and long-term savings plans. If I do buy property, I want to pay in cash, if possible, to avoid debt. The money I make from property investments comes from rental cash and slow-and-steady equity gains.
For the risk averse, it may be wise to:
- Make a plan – speak to us about what you are investing for and how best to get there, and review your plan often
- Stick to a small, well-chosen portfolio – especially until you have developed experience, expertise and confidence
- Buy properties in blue-ribbon areas – properties close to the CBD with good amenities very rarely lose value
- Look for long-term tenants – avoid student or resort accommodation
- Become an expert – research, discuss and number-crunch to expand your comfort zone
- Build a trusted team to protect and enhance your investment.
I am risk tolerant
For me, risk is all part of the game. In fact, it’s a good indicator of how much money I should be able to make on an investment. I’m comfortable with renovating, developing and trying new investment structures and strategies (like developing student apartments or investing in rent-to-buy arrangements) if a decent return is likely.
For the risk tolerant, it may be wise to:
- Make a plan – speak to us about what you are investing for and how best to get there
- Vary your portfolio to spread the risk
- Make sure you structure your portfolio and your personal finances to protect your investments
- Mitigate your risks by building a team (that includes, for example, building inspectors, a good solicitor and a good accountant) to protect and enhance your investment.
Most of us fall somewhere in between these two extremes. Neither position is inherently good or bad – they are just natural inclinations. However, they do have a large impact on our investments.
We’d like to help you get the balance right – a portfolio that suits your risk portfolio and your investment needs.