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Risk: what's your appetite?

Risk is different for everyone, for some it’s a walk down an alley at night – for others a plane flight. When we think about risk in investing or wealth creation for some it’s the share market and for others it’s property, and for some generations it is putting money in the bank!

We know, from the moment we took our first steps, that risk can also bring rewards so most of us learn to be a little comfortable with risk, but how can you manage risk & benefit from some of the rewards.

The first step is probably understanding your comfort level, financial planners in their process put clients through an extensive risk profiling and surprisingly most of us profile as being far more risk adverse than we might think we are.

If we’re talking about risk in investing, we can mitigate by using some simple techniques:

  • Educate yourself, there are many professionals willing to share their knowledge & help you get a start

  • There are professionals who’s job is to look for better opportunities for you, leverage off of their skills and training

  • Begin small - invest what you can afford to lose, and increase your exposure as your education grows

  • Consider sticking to the trusted areas, while far from foolproof you might consider a blue chip type stock to be more comfortable, or for property this might mean an average Sydney home

  • Finally, insurance for a property investment is often cheaper than your car insurance – while this does not protect you from market fluctuations it does protect you from tenants breaking a lease, or damaging your property & certainly goes a long way to mitigating your risk.

A general rule of thumb that we are taught is to buy the average home in the average neighbourhood and this secures you the greatest pool of potential tenants and potential purchasers when it’s time for you to move on, perhaps this helps you create a strategy.

If I am asked to give my opinion on just how to stretch yourself, if you really want to make a start in property investing and I would say follow all of the above steps and just get started. If you do the research, use the advice of your trusted professionals and get started the chances are you’ll be looking back on today & wondering why you didn’t buy 5 houses!

full article in the Western Weekender

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