Investor Profile: Helping You Set Realistic Investment Goals

Investor Profile: Helping You Set Realistic Investment Goals

Understanding what type of investor you are is vital to becoming a successful investor. By taking the time to understand your risk profile, investment goals, time outlook and the amount of capital you have to invest, you will be much better placed to make sensible decisions as to which stocks are suitable for you and how to allocate your funds. Not all of our recommendations are suitable for everyone. You must remember that The Rivkin Report provides general stock market advice and that the final investment decision can only be made by you.

When investing in the market, you should have realistic and measurable goals. Investment expectations will be different for everyone and will vary due to the following key factors:

- Time outlook
- Amount to invest
- Risk profile
- Investment goals

The following information explains each of these factors and will help you to identify what type of investor you are. Having done this, you will be able to set realistic and appropriate investment goals based on your own investor profile.

Time Outlook

What time outlook suits you best?
There are basically three types of investment; short, medium and long term. The three different types of investment require differing degrees of consideration and attention. It is very important that you invest in such a way that is consistent with the time and effort you spend at this task. You should develop an investment system that suits your personality, financial circumstances, investment objectives and particular needs.

Short-term investor
As a short-term investor, you should watch the markets daily. You should be prepared to enter and exit trades quickly and effortlessly. One must be able to take a loss when a trade is not progressing as anticipated. A short-term investor or trader must be prepared to exercise vigilance in watching market developments. Typically, short term investors measure investment periods in weeks, up to about 6 months. In making short-term recommendations, we consider sentiment changing events as well as stock fundamentals.

Medium-term investor
Medium-term investors generally measure investment periods in months, up to about two years. In making medium-term recommendations, we consider market sentiment with a stronger focus on stock fundamentals.

Long-term investor
Long-term investors basically ride out the cycles and accumulate good stocks. They rarely sell and don't worry about short to medium-term downward moves in the market. Remember, over the long run, the market has always gone up and will continue to do so. The major focus of a long-term investor is to be confident the stocks you are holding are, and remain, blue chips. You should also refrain from watching the markets daily. There may be several times over a decade or so when your positions aren't looking healthy, but short to medium-term aberrations aren't of any consequence to the long-term investor holding quality investments. Just as most people don't sell their home in order to capitalise on price changes, long term investors also generally hold.

Amount to Invest

How much do you have to invest directly in the market?
The amount of money that you have to invest will be a major factor in determining your investment goals. If you are a long term investor and have a considerable sum of money to invest in the market, you may choose to build a portfolio of stocks that contains some high, medium and low risk plays. On the other hand, you may have the majority of your savings invested in property or managed funds, and simply allocate a small portion to trading higher risk stocks with the aim of achieving high returns.

Once again, you must consider your own situation and personality. If you have $5,000 to invest for your child's future education, you are most likely going to be very hesitant to risk it on a high risk play, opting instead for a low risk, long term investment. In this situation, you would also need to appreciate that you will not have the ability to diversify your investment across more than two stocks at the most.

When it comes time to setting your investment goals, look carefully at the amount of money you have to invest and ask yourself; 'Is this a realistic goal considering the amount of money I have available to invest in the market?'

Risk Profile

How would you describe your risk tolerance?
Risk is an incredibly important concept to consider when it comes to investing, and it is often misunderstood and neglected by investors. Understanding your personal tolerance to risk is essential in determining your profile as an investor. This comes down to your personal traits. Are you a worrier? Would a short-term decline in your investment cause you to lose sleep? If so, you must invest accordingly.

The comfort zone, or risk tolerance, ranges from conservative to moderate to aggressive. Working out which category you fall into shouldn't be too hard. If, for example, you have painstakingly saved $10,000 over many years of hard work and you are looking to make it grow and to start a family, you would be somewhere in the conservative to moderate range.

However, you may be someone who has multiple assets and investments and are looking to allocate a portion of your capital to potential high growth stocks. In that case, you would be more moderate to aggressive and hence, your investments could be somewhat exposed to the higher risk end of the spectrum.

It also depends on your personality. Some people, no matter how high their disposable income or how many assets they have, are simply unable to accept even a small amount of risk. Basically, you must assess the kind of person you are and your financial situation. You should then be able to determine the amount of risk you are willing to assume.

Regardless of your risk tolerance, you should always remember the following rules:

The stock market is inherently risky despite The Rivkin Report's best efforts to minimise risk and maximise return.

Invest in such a way that the potential losses are tolerable.

Risk plays a very important part of The Rivkin Report Investment Team's strategies and philosophies. One of our golden investment rules, in fact, is to 'always consider the downside first'. There is an old market adage that only high risk trades provide high returns. We have proven many times that this is simply not the case. In our Report each week, we help teach members how to uncover low risk, high return opportunities.

On the subject of risk, please also be wary of having a portfolio that is too heavily weighted in one particular sector. For example, we have spoken with members who have a portfolio that includes 4 stocks in the gaming sector and therefore, their risk has been greatly increased due to the large amount of exposure to the one sector. The stocks that you hold should ideally be spread across several sectors.

Investment Goals

What do you hope to achieve through stock market investing?
It is important to work out what type of returns you expect from your stock market investments, and your newly acquired knowledge of your investor profile can be used to guide you. Are you looking for solid 15% gains over a year or are you looking to double your money in a year in the stock market?

Whatever the case, your goals should be realistic. They must consider your time outlook, risk profile and the amount of money that you have to invest. Once you have set realistic, achievable goals, you are ready to begin investing in the stock market.

The Rivkin Report can assist you in identifying investment opportunities that are suitable for your investor profile. All of our recommendations come with a time outlook and risk rating to help you decide if it is suitable for you.

Finally, The Rivkin Report is an investment tool. Like any tool, its effectiveness is dependent on the skills of the user. We encourage our members to develop their investment skills in order to maximise the effectiveness of The Rivkin Report.