When it comes to investing, one of the most important things to understand is your risk profile. It’s a concept that gets thrown around a lot by financial professionals, but in simple terms, your risk profile is a mix of your comfort with risk, your financial goals, and the time you have to achieve them. Knowing your profile helps you pick the right investments, whether that’s something conservative and steady, or higher growth with more ups and downs along the way.
What exactly is a risk profile?
Think of it like this: if you were going on a road trip, your risk profile would be the type of car you choose. A conservative driver might pick a sturdy, fuel-efficient sedan that gets them there safely, even if it’s not the fastest. A growth-oriented driver might jump into a sports car; it’s quicker and more exciting, but bumpier along the way. Both can get to the same destination, but the experience is very different.
In investing, your profile reflects:
- Risk tolerance – How comfortable are you with seeing your investments move up and down in value?
- Risk capacity – How much risk can you afford to take given your financial situation?
- Time horizon – How long can you leave your money invested before you need it back?
The Spectrum: from Conservative to High Growth
Most investors sit somewhere along this spectrum:
- Conservative: Low tolerance for losses, short to medium-term goals. Portfolios focus on capital preservation and reliable income. Typically made up of cash, bonds, and lower-volatility investments such as core property or infrastructure.
- Balanced: Willing to take on some risk for a mix of income and growth. Balanced portfolios are usually around half defensive assets (like bonds and private credit) and half growth assets (like shares, property, and infrastructure).
- Growth: Longer timeframes and higher comfort with ups and downs. Growth portfolios lean heavily towards shares and alternative assets like private equity and property, aiming for stronger long-term returns, though with more volatility.
- High Growth: Designed for those with long horizons and high tolerance for risk. These portfolios are dominated by equities, private equity, and global opportunities, often complemented by infrastructure and alternative assets. They aim for maximum long-term returns, but short-term drops can be significant.
Why it Matters
If your investments don’t align with your risk profile, you’re more likely to panic in the wrong moments. Imagine being a conservative investor holding a high growth portfolio — when markets drop, you may be tempted to sell at the worst possible time. On the other hand, a younger investor in their 30s sticking only to conservative assets might struggle to grow their wealth fast enough for retirement.
Getting this match right is what helps investors stick to their strategy through good times and bad.
How Rivkin’s SMAs fit in
This is where Rivkin’s Separately Managed Accounts (SMAs), in partnership with Mason Stevens, come in. Each portfolio is carefully built to suit different risk profiles. Whether you’re looking for steady income, balanced growth, or a long-term wealth creation strategy, there’s a managed option designed with you in mind.
And it’s not just shares and bonds, Rivkin’s portfolios also consider exposure to asset classes like infrastructure, property, private equity, and private credit, which can play an important role in diversifying returns and managing risk.
The beauty of an SMA is that you still retain ownership and visibility over the individual investments, unlike a traditional managed fund, where you just see the unit price. At the same time, you’ve got professional managers making the day-to-day investment decisions, so you don’t need to stress about timing the market or second-guessing every move.
Finding Your Fit
If you’re unsure where you sit on the risk spectrum, that’s perfectly normal. Most investors need a bit of guidance to work it out. A financial adviser can help by asking about your goals, how you’ve reacted to market swings in the past, and when you’ll need the money.
The important thing to remember is that there’s no “one-size-fits-all” portfolio. The right choice depends on you: your goals, your comfort level, and your timeframe.
The Takeaway
Understanding your risk profile isn’t just financial jargon, it’s a practical tool that helps you invest with confidence. By matching your portfolio to your profile, you can stay the course during market ups and downs and give yourself the best chance of reaching your goals.
What is a Separately Managed Account?
- Choose from five professionally constructed portfolios depending on your needs
- All portfolio management is taken care of for you
- Obtain institutional brokerage rates that are not typically available to individual investors
- Execution is performed using algorithms that spread trading out across the day to obtain a fair price
- No upfront cost – management fees are deducted from your account on a monthly basis
For a complete list of risks and costs involved with Mason Stevens Separately Managed Accounts, please refer to the Investment Mandate.
Please request the PDS during your complimentary no-obligation call with on of our experts or by contacting us directly via phone at 1300 748 546 or email us at [email protected] to understand the full risks and costs of the product before making a decision to invest in it.
Important Notice:
Please consider your own financial situation before investing in our products. Rivkin does not provide personal financial advice and does not take anyone’s personal financial situation into account when structuring its model portfolios.
Past performance and/or backtesting are not a guarantee of future performance. Investing and trading carry financial risk. When judging performance, please consider the different types of investments and the levels of risk associated.
To learn more about how we calculate performance, click here.
You should consider the product disclosure statement prior to making any investment decisions. If you require financial advice that takes into account your personal objectives, financial situation or needs, you should consult your licensed or authorised financial adviser or our Rivkin Wealth Advisors service on 0283023620 or via email at [email protected], subject to a statement of advice. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.
All opinions and estimates constitute judgments of Rivkin and are subject to change without notice. These statements should therefore not be relied upon as an accurate representation or prediction as to any future matters. No company associated with Mason Stevens guarantees the performance of any fund or the return of an investor’s capital. Past performance is not indicative of future performance.
