What are the five main Asset Classes?
Risk and Return
What is investment risk?
Investment risk can be defined as the probability or likelihood of occurrence of losses relative to the expected return on any particular investment. Stating simply, it is a measure of the level of uncertainty of achieving the returns as per the expectations of the investor. All investments carry some risks due to many factors including inflation, tax and economic downturns.
As a general rule: the larger the potential investment returns, the higher the investment risk.
The risk-return trade off
All investments carry some degree of risk. Higher risk is associated with greater probability of higher return and lower risk with a greater probability of smaller return. This trade off between risk and return which an investor faces while considering investment decisions, is called the risk return trade off.
The risk-return trade off is the principle that potential return rises with an increase in risk. Low levels of uncertainty or risk are associated with low potential returns, whereas high levels of uncertainty or risk are associated with high potential returns. According to the risk-return trade off, invested money can render higher profits only if the investor is willing to accept the possibility of losses.
Higher risk does not always promise greater return. Rather, it tells us that higher risk gives the possibility but not the guarantee of higher returns.
As your financial planners, we will take to your income, goals, investment horizon and personal situation into account and create a risk profile with that information. It is important to know which level of risk you are prepared to tolerate to provide you the best financial advice as possible.
Use the Insurance Gap Calculator to see how much cover is adequate for you!
Australian Securities and Investments commission (ASIC) is the corporate, markets and financial services regulator.
Federal Budget Summary
- Dividends are great for investors. They augur well for earnings growth, provide a degree of security in uncertain times, are likely to comprise a relatively high proportion of returns going forward and provide a relatively stable source of income.
- Including reinvested dividends, the Australian share market has surpassed its 2007 record high.
- It’s important that dividend imputation is not weakened in Australia to ensure dividends are not taxed twice.
Read more about dividends, by clicking on the link.