Investing jargon made simple: Portfolio types

Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.

In this video, we are going to explain the five different types of investor our Fully-Managed Investment Portfolios might be suitable for. Don’t worry if you’re not sure as our online assessment identifies which type of investor you look like based on some simple multiple choice questions.

Defensive investor

A defensive investor is mainly concerned with volatility (the amount an investment goes up and down in value), which could mean they are willing to accept lower long-term returns in exchange for smaller and less frequent changes in Portfolio value in the short term.

Safety for their investment is the priority, they don’t want to see short term losses, so they are willing to accept smaller long-term gains on the understanding that they’ll have more stability in the value of their investment.

Cautious investor

A cautious investor is the next step along from a defensive investor. Protecting against short-term volatility rather than maximising for long-term growth is still the main concern, albeit to a slightly lesser extent.

On the scale of risk and reward, a cautious investor may tolerate a little more price fluctuation than a defensive investor, thus seeing more potential opportunities for growth in the long term.

Balanced investor

On the defensive to aggressive scale, balanced sits in the middle. Reducing volatility and maximising returns are typically of equal importance to the Balanced Investor.

Still, the balanced investor is still concerned with short term losses and may shift to a more stable option in the event of significant volatility.

Growth investor

A growth investor may be willing to accept higher risk and the chance of increased volatility in order to achieve higher returns on their investment.

Significant fluctuations over an extended period may prompt the Growth Investor to shift to a less risky investment, but on the whole the focus is on the potential growth which could come with holding on to this investment long term.

Aggressive investor

The aggressive investor is most concerned about long-term expected returns. Minimising possible volatility isn’t the main goal, which means the aggressive investor can tolerate both large and frequent fluctuations.

In exchange for accepting fluctuations in the short term, the aggressive investor aims to achieve higher return over the long term. On the scale of risk and reward, more risk is taken for the potential of more reward.

When reflecting on these five risk profiles, remember there is no right or wrong type of investor and we have all five types on True Potential Investor.

Take our online assessment today to find out what type of investor you are.

With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. Past performance is not a guide to future performance. Tax rules can change at any time. This blog is not personal financial advice.

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