When people talk about investing, the discussion often jumps straight to instruments like stocks, bonds, or funds. However, these discussions are moot if investors haven’t yet answered a more important question: What risks am I willing to take?
Your risk profile is fundamental to your choices, as it directly answers what investments you may be comfortable with. Taking time to define it can help you make more informed, less emotional decisions, a decisive advantage when markets become unpredictable.
Key Factors That Shape Your Risk Profile
Before considering specific investment instruments, it is helpful to address a few fundamental questions. EastWest offers an investment profiling quiz that can help you understand your risk comfort levels and identify the EastWest investment products that best match your needs. But wherever you invest, you’ll benefit when you understand the following:
- Investment goals: Are you aiming for capital preservation, income generation, or long-term growth? Perhaps a mix of each? Your portfolio must be composed of products that closely reflect your goals.
- Time horizon: When will you need the money? Investment vehicles with longer timelines can generally accommodate more market fluctuations.
- Financial stability: Do you have a steady income and an emergency fund in place? If no, you may prefer to prioritize low-risk, capital-preserving investment options and hold off on ones designed for aggressive growth.
- Risk tolerance: How well do you handle short-term losses or market swings?
Depending on your answers, you may fall into one of three general categories.
Conservative Profiles: Prioritizing Stability and Capital Preservation
If your main goal is to protect your capital and maintain liquidity, you may lean toward a conservative profile. This approach is often suitable for risk-averse investors who prefer predictable outcomes.
Within EastWest’s lineup, Money Market UITFs, such as the EastWest Peso Money Market Fund, are often recommended to conservative investors. These funds invest in short-term, highly liquid instruments and are structured to manage risk while offering steady returns. These offerings can serve as a stable entry point for those prioritizing liquidity and capital protection.
Government securities, available among EastWest’s fixed income offerings, may also support conservative objectives. These instruments are typically viewed as lower risk and can provide more predictable income streams for investors who value stability over aggressive growth.
Moderate Profiles: Balancing Risk with Bond-Focused UITFs
Investors with a moderate risk profile typically aim to strike a balance between maintaining stability and pursuing improved returns. This approach allows for some exposure to market movements while keeping risk within an investor’s comfort zone.
EastWest’s Bond UITFs, including options such as the EastWest Peso Intermediate Term Bond Fund and EastWest Peso Long Term Bond Fund, are often recommended for these investors. These funds invest in fixed-income instruments that may generate regular income while generally experiencing less volatility than equity markets. Moderate investors may also combine bond UITFs with more conservative funds to create a diversified portfolio that supports medium- to long-term financial goals.
Aggressive Profiles: Targeting Growth through Equity UITFs
If you have a longer investment horizon and are comfortable dealing with market volatility, more aggressive investments may be appropriate. Aggressive risk profiles and risk-exposed investments are often associated with long-term wealth-building objectives, including retirement planning and capital growth.
EastWest’s Equity UITFs, such as the EastWest PSEi Tracker Fund, EastWest PhilEquity Feeder Fund, and EastWest S&P 500 Index Feeder Fund, are typically aligned with this growth-oriented approach. These funds provide exposure to stock markets, where short-term price movements can be significant but long-term growth potential is higher. For seasoned investors with aggressive risk profiles, temporary market downturns are generally viewed as an inevitable part of the investing journey rather than a signal to exit, enabling a singular focus on long-range objectives.
Why Diversification Matters Across All Profiles
Diversification remains an essential investment principle, regardless of your financial standing or risk profile. Spreading investments across different asset types can help reduce the impact of market volatility and prevent overexposure to any single risk. While no approach can eliminate risk entirely, diversification can help any investor manage it more thoughtfully.
Reviewing and Adjusting Your Risk Profile Over Time
Risk profiles are seldom static. Most investors will eventually experience changes in income, family responsibilities, and financial goals. Also, even the most consistent investors have little control over wider macroeconomic conditions. This means that you are likely to benefit from periodic adjustments in your investment approach. Periodic reviews of wider economic conditions, as well as your finances and risk appetite, help ensure your investments remain effective and aligned with your comfort level.
Make Informed Investment Decisions with EastWest
When you choose the right investment instruments for your goals, you can maximize your growth potential without causing unnecessary stress. EastWest offers a range of investment options designed to accommodate different risk preferences and financial objectives. We can help you develop a clearer understanding of your personal risk profile, so you can explore suitable investment avenues with greater clarity. Take the next step toward a more informed investment strategy at EastWest.
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