How to Invest If You Have a Low Risk Appetite?

There is no denying that investments play a key role in improving financial health. By investing a portion of your money in the right way, you can provide yourself a financial cushion during uncertain times. Moreover, investments can also help you achieve your financial goals in a planned manner. If you are a beginner, looking forward to starting your investment journey, it is essential that you set investment objectives and evaluate the risk appetite beforehand. Do not be lured by investments that speak of high returns in a short duration, especially if you have a low-risk appetite. This is because investments with high returns have high risks associated with them.

Fret not! You can make your money grow by making the right investment even if you have a low-risk appetite in numerous other ways. On that note, let us check out some basic approaches that can help investors with a low-risk appetite to design a better investment portfolio:

  1. Opt for Goal-Based Investing

You must carefully set your financial goals and make investments accordingly. Be it short-term goals like buying a car, planning an exotic vacation, or long-term goals such as buying a house, planning for retirement, etc., make sure that the investments are goal-based. This will help you know the exact timeline for encashing the investment. You can stick to the Systematic Investment Plan (SIP) to take care of your financial goals. So, what is SIP? And How to invest in SIP? Here’s the answer:

What Is SIP?

SIP investment is an investment strategy that is offered by different mutual fund houses to the investors. With SIP investment, the investor can invest a fixed amount regularly in their mutual funds. If you have a low-risk appetite, you can easily plan long-term financial goals using SIP. By investing in SIP for a longer duration, you wouldn’t have to worry about short-term market fluctuations.

How to Invest In SIP?

Go through the steps below in order to know how to invest in SIP.

Step 1: Evaluate your risk appetite and investment objective

Step 2: Select a mutual fund for your investment

Step 3: Select the date of SIP

Step 4: Decide on the duration of SIP

Step 5: Stay invested by making timely payments

SIP investment is one of the finest ways to create long-term wealth, and hence, you must make the most of it while building the investment portfolio.

  1. Don’t Rely Too Much on Equity If You Have a Low Risk Appetite

Though investing in equity can gain you high returns, the risk associated with it is also significantly higher. Therefore, if you have a low-risk appetite, avoiding equities or taking less exposure would be a better option.

  1. Consider an Appropriate Mix of Investments

Make sure that the investment portfolio has the right mix of the three major asset categories, i.e. stocks, bonds, and cash. This will reduce the risk of loss, and the overall investment returns will have a smoother ride. If one asset category’s investment return falls, you will be in a position to neutralize it with better investment returns in another asset category.

By making the most of the above-mentioned approaches, you will be able to build a strong investment portfolio despite a low-risk appetite. In case you have any queries while designing the investment portfolio, you must not hesitate in seeking the help of a financial advisor. This will help you make the right decision and avoid any inconvenience later.

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