How to choose the safest investment for your portfolio
In the lead up to the global financial crisis, the Federal Government set a high bar for investment advice: investors should only invest in stocks with the highest returns, low fees and lowest risk.
But that’s all about to change.
New research from Deloitte has found that even in the worst of times, it’s still very easy to invest in highly rated stocks.
And, while it’s a little risky, it doesn’t have to be.
It’s also easy to choose a portfolio that suits your personal preferences.
If you want to save on fees, look for companies that pay their directors fairly and are highly risk-adjusted.
And if you want a safe investment, you want stocks with no more than a 3 per cent risk-weighted return and no more per share losses.
But for the best, you should stick with a balanced portfolio of stocks that has the lowest risk and highest return.
It helps if you’re not a risk-averse investor, but that’s not always easy.
For example, if you like a little bit of volatility in your investments, you might prefer an index fund that has high returns with low fees.
But if you prefer to be more risk-based, or you’re just looking for a good risk-free portfolio, you may want to consider ETFs.
The best way to diversify your portfolio is to hold stocks that have a high level of diversification, Deloise found.
But how do you decide which stocks to invest your money in?
The answers lie in your personal risk tolerance.
Some investors prefer to buy low-risk stocks and hold them for a while, while others prefer to hold high-risk companies and wait for their returns to reach their target.
But there are two general ways to think about your risk tolerance: the amount of volatility and the quality of the returns.
For low-viscosity stocks, such as pharmaceuticals, biotechs and energy companies, you need to keep your money safe.
For high-viseye stocks, like technology companies and oil and gas companies, such investments are better.
In the short term, high-quality, high volatility stocks are good for you, as they offer a steady stream of revenue and can generate profits if they’re growing.
But the longer-term, low-quality stocks can be a great investment if they have an attractive growth outlook, low cost and are diversified enough to provide steady revenue.
For a long-term investment, high quality stocks are usually better than low quality ones, because they offer diversification and lower risk.
You may also want to look at your individual risks and risk tolerance if you have a range of investments.
It might be worth looking at your own finances if you already have a broad range of different investment options and if you’d like to consider diversification or other options.
You’ll find this information on the Deloiser.com website, with information on how to choose an investment portfolio.
For more information, see our investing resources page.