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Investor profile

These are the concepts you need to be clear about: return and risk

Rentabilidad y riesgo en fondos de inversión

Two basic concepts to decide your investor profile

If you've never invested in funds, it's time to forget about markets and managers. Just focus on these two concepts – they're the only ones you need to be clear about.

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Investment funds contain two inextricably linked variables: the expected return and the potential risk. The two concepts operate in a directly proportional manner and make all the difference when choosing one fund over another.

Risk definition

The potential risk of a fund, whether higher or lower, is basically related to the percentage it invests in the equity market, i.e. the stock market. As you no doubt know, this market is more volatile that other markets. It offers a higher return but the potential risk is also higher.

What do these concepts actually mean?

Expected return
The lower the expected return, the lower the potential risk.
LOW
MEDIUM
HIGH
Potential risk
And conversely: the higher the expected return, the higher the potential risk.
LOW
MEDIUM
HIGH

Now you can answer this question: what profile do you identify with?

Ant

If you're looking to achieve your goals little by little with a reduced level of risk and within a reasonable time frame.

The value of investment funds can go down as well as up, and this may mean you get back less than you invested.

Low expected return

Low potential risk

Dolphin

If you are looking for a balance between return and risk and are willing to increase the percentage of your investment in equities.

The value of investment funds can go down as well as up, and this may mean you get back less than you invested.

Medium expected return

Medium potential risk

Lynx

If you are clear that your main objective is to grow your wealth, even if it means assuming a high risk.

Remember, the value of investment funds can go down as well as up.

High expected return

High potential risk

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