Your investor profile: Investing according to risk tolerance

Creating a successful investment strategy requires careful consideration and a clear understanding of your financial goals. Knowing your investor profile is the foundation of financial planning. Find out why.

What is an investor profile?

An investor profile is a highly individualized portrait of your risk tolerance and investment goals. It’s like a snapshot of your current financial situation, lifestyle and ambitions. Used as a compass to help guide your decisions, your investor profile ensures that the investment strategy you’re considering fits your short- and long-term objectives. In other words, it’s the most accurate reflection of the kind of investor you are.

Why take the time to create an investor profile?

An investor profile is an excellent tool for developing investment strategies that align with your financial needs and your tolerance to the risk inherent in a fluctuating market. When your risk tolerance, financial situation and investment objectives are clear, it’s easier to customize your strategy. What’s more, an up-to-date investor profile can help you identify potential investment opportunities and mitigate risk over time.

Building your investor profile

Building your investor profile involves taking stock of various aspects of your personal situation, such as your age, marital and financial situation, investment objectives, risk tolerance and investment knowledge.

What are the different investor profiles?

At iA Financial Group, we work with five types of investor profiles, classified according to risk tolerance level:

• Conservative
• Moderate
• Balanced
• Growth
• Aggressive

Each profile corresponds to a portfolio of funds with an asset mix that aligns with an individual’s unique tolerance to financial risk. Each fund contains different proportions of income funds, Canadian equity funds, foreign equity funds and alternative or specialty funds.

Generally, “conservative” portfolios hold a larger share of income funds (such as bonds) to insulate them against the ups and downs of the stock market.

At the other end of the spectrum, “aggressive” portfolios by their nature have a greater proportion of riskier securities, such as foreign equity funds, which are prone to wider fluctuations in their returns.

What are the advantages of having a comprehensive investor profile?

There are many! For one thing, it can point you to better investment decisions. What’s more, your investor profile also guarantees you certain legal protections when completed with the help of a financial security advisor, who is legally required to adhere to their client’s risk profile when recommending investment solutions, which means additional security for you.

The importance of keeping your investor profile up to date

An investor profile is not set in stone; over time, your personal and financial situation will evolve as you move through different life events. That’s why it’s essential to regularly reevaluate and update your profile to reflect your personal and financial situation as it currently stands.

No matter which profile you initially choose or the modifications you make along the way, the best investment strategy is always the one that helps you sleep at night.

Happy investing!