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How to determine your investor profile

Posted on Wednesday April 21, 2021

How to determine your investor profile

What's an investor profile and what's its purpose? It's the foundation upon which a sound investment strategy is built. If you dream of travelling the world in a few years or starting your own business, your investor profile is central to a strategy for achieving your dreams. And it starts with a careful review of your situation, which may change over time.

Why you need an investor profile

An ill-prepared investor is exposed to a high level of risk. Avoid doing what your friend Ricky did: overestimating your knowledge and losing everything in the stock market. Take the time to develop a good financial plan.

An investor profile is the cornerstone of your advisor's investment recommendations. Your advisor's role is to help you make sound financial decisions.

Your profile takes into account your goals (your dreams), your investment horizon and your risk tolerance. For example, at age 25, your horizon will be long if you're investing for retirement, but it will be shorter if you want to travel the world.

Through a questionnaire and discussion, your advisor will ensure that the product you choose is right for you, providing the best possible return while aligning with your risk tolerance.

What goes into your investor profile

To get a complete picture, you will be asked about your current situation and your goals, and your knowledge of personal finances will also be assessed. You don't want a trip to prevent you from starting your own business later on! You have to understand where you've been to know where you're going!

Evaluating your personal and financial situation

Your marital and family situation must be factored into your investor profile. Do you have responsibilities such as dependent children? Will you be managing part of your finances jointly with another person?

Your age and your assets are also important because they influence your investment horizons and financial capacity. Your financial literacy can also have an impact on the products you may be offered.

In short, with a portrait of your personal situation, your advisor can see whether your objectives are achievable based on your responsibilities.

Defining your investment goals

Your advisor's job is to analyze and understand your dreams in order to translate them into financial goals.

For example:

  • Do you want to generate stable income to meet some of your daily needs?
  • Are you looking for security so that your capital will be intact after a few years?
  • Do your age and risk tolerance allow you to invest for capital growth?

Your personal situation always has an impact on your goals. If your income is high, reducing tax may be important for you, so you might want to choose more tax-efficient investments. Similarly, if you're planning a life or work change, having access to your money will be a priority, so choose the best investments for your goals.

Planning your investment horizon

For each investment goal, you need to establish a horizon. Will you need this money in five years or 20? The horizon is the time between when you invest and when you cash out the money needed to achieve your goal.

Evaluating your risk tolerance

The biggest gains often come from riskier investments. Does the thought of your portfolio going up or down by 10% or 15% in a single week cause you anxiety? And if you're not worried about retirement yet, would you be stressed about investing the down payment on your first home?

Risk tolerance has both emotional and factual aspects—your willingness to assume the risk of loss and your financial ability to overcome it. Even with a good income and a significant net worth, some people tend to worry. Something that can't be ignored is that your quality of life depends as much on your financial health as it does on your peace of mind.

How to make the most of your investor profile

The investor profile is a tool for guiding your investments that should be reviewed regularly because your life and plans change over time.

Increasingly, young, knowledgeable and small investors are attempting to manage their investments themselves. While this strategy can lead to gains, it can also be risky due to the investor's lack of knowledge. Experienced advisors are used to profiling investors and acting in their best interests.

To create a personalized and effective plan, don't hesitate to speak with one of UNI's wealth management advisors and financial planners.

Mutual funds and related financial planning services are offered through Credential Asset Management Inc. Mutual funds, other securities and securities related financial planning services are offered through Qtrade Advisor, a division of Credential Qtrade Securities Inc.

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