Welcome to Fintastic Females, where we embark on the journey of finding the mythical island of freedom together. I’m Kalyani, one of your finance expert hosts, and joining me is Rupali. In our previous episode, we discussed various types of investments. Today, we want to help you take actionable steps based on your risk appetite and personal situation. Before diving into the topic, we recommend visiting the show notes and taking our quiz to understand your risk tolerance. Risk is a significant aspect of investing, and it has two components: ability and willingness. Ability to take risks depends on your current financial situation, income, expenses, and commitments.

On the other hand, willingness to take risks is subjective and varies from person to person. Your risk appetite may change over time and differ across different areas of life. For example, you might be comfortable taking more risk with your pocket money fund but prefer low-risk instruments for your retirement or children’s education funds. It’s important to reassess your risk tolerance regularly, especially during major life changes. Safer investments generally offer lower average returns, while riskier investments attract individuals with the promise of higher rewards. It’s essential to align your return expectations with your risk tolerance. If you have a low risk appetite, aiming for double-digit growth may not be realistic or suitable for your goals.

Financial advisors can assist in customizing your investment portfolio based on your specific financial situation, risk preferences, and goals. However, our aim is to empower you to take control of your investments. Once you understand your risk appetite, it’s time to determine where you want to start investing. Before that, let’s explore the concept of risk itself. Risk is often associated with volatility, the fluctuation of investment values. But it can encompass other factors, such as liquidity risks and the ease of accessing your money from an investment. It’s crucial to remember that risk is relative and specific to each individual. Two people with similar income and goals may have different risk appetites and investment strategies.

Risk tolerance also plays a vital role in determining your expected returns. To manage risk effectively, it’s necessary to establish your goals and prioritize them based on urgency and importance. For example, short-term goals like a child’s birthday party may be urgent but less crucial in the bigger picture. In contrast, a long-term education fund for your child might be important but less time-sensitive. Understanding risk requires balancing excitement and pressure. Before considering investments, ensure you have liquid assets to cover your regular expenses. Then identify your goals, placing them on a scale between urgency and importance.

Your risk tolerance should align with the goals’ time horizons and significance. Risk exists regardless of whether you invest or not. The choice lies in determining which risk level you are comfortable with and selecting assets that align with your risk tolerance. To address the mindset and energetics around risk, it’s crucial to recognize that risk is inherent in various aspects of life, including investing. Comparing yourself to others may not be helpful since risk perception is subjective and relative. Objectivity and platforms like ours can provide valuable insights. Now, let’s discuss two fictional personas based on the TV show Friends.

First, Monica, who is conservative and relies on her steady job and cash flow. She has long-term goals such as retirement and education funds for her children. For someone like Monica, with low risk tolerance, lower returns can be expected. However, understanding the power of compounding can be empowering. Even small, consistent returns can compound over time and generate significant growth. Certainly! As we conclude today’s episode, we want to emphasize that understanding and managing risk is a crucial aspect of successful investing. By assessing your risk appetite, considering your financial situation, and aligning your goals with your tolerance for risk, you can make informed investment decisions. Remember that risk is a personal and ever-evolving concept. Your risk tolerance may change over time, and it’s important to regularly reassess your investments and adjust them accordingly. Don’t be afraid to seek guidance from financial advisors or educational resources to help you navigate the investment landscape. Investing involves taking risks, but it also presents opportunities for growth and financial independence. By striking a balance between risk and reward, you can set yourself on a path towards achieving your financial goals and securing a brighter future.

Thank you for joining us on Fintastic Females today. We hope you found this episode insightful and empowering. Remember, you have the power to take control of your financial journey and make decisions that align with your risk tolerance and aspirations. Stay tuned for our next episode, where we will dive deeper into specific investment options and strategies to help you build a robust and diversified portfolio. Until then, keep exploring, learning, and embracing the exciting world of finance. Safe travels on your journey to the mythical island of financial freedom!

This is Kalyani and Rupali signing off, reminding you that together, we can navigate the seas of finance and discover our own version of Fintastic Females.