Is It Possible to Balance Low and High Risk Investments

Building an investment strategy often feels like a balancing act. On one hand, you have high-risk investments that offer the potential for growth. On the other, low-risk options can provide capital preservation. Finding the right mix between these two allows you to prepare for your financial goals. While it may seem complex, balancing your investments is possible, and working with the professionals at Harvest Wealth Partners can help you create a financial plan tailored to your specific situation.

What Are High-Risk Investments?

High-risk investments are assets that have the potential for returns but also come with a higher degree of volatility and the possibility of loss. These investments are often more speculative and can experience dramatic price swings. Because of their volatile nature, they are historically suited for investors who have a long-term horizon and can weather market downturns.

Examples of high-risk investments include:

• Cryptocurrencies: Digital currencies are notorious for their highly volatile price swings.
• Emerging Market Stocks: Investing in companies in developing economies can offer growth potential but also carries risks related to political and economic instability.
• Speculative Real Estate: This involves purchasing properties with the hope of a quick and profitable resale, often in up-and-coming or unproven markets.

What Are Low-Risk Investments?

Low-risk investments prioritize safeguarding your initial capital while offering more modest returns. These assets are the backbone of a strategy, providing a potential income stream that can help offset the volatility of higher-risk holdings. They are a popular choice for investors nearing retirement or anyone with a lower tolerance for risk.

How Can I Determine My Risk Tolerance?

Your risk tolerance measures your ability and willingness to withstand potential losses within your investments. Understanding it is crucial for building a strategy that you can stick with, even when the market is unpredictable. Asking yourself the following questions can help you gauge your risk tolerance:

• What is my current financial situation? Are you in a confident financial position with an income and an emergency fund?
• What are my long-term goals? Are you saving for a goal far in the future, like retirement, or a short-term objective, like a down payment on a house?
• Do I feel confident with volatility? How would you react emotionally if your investment value dropped significantly in a short period?

What Is Diversification?

Diversification involves strategically allocating investments across various asset classes to mitigate risk. The fundamental principle is to manage the impact of underperforming individual assets. This strategy applies not only to balancing high and low-risk categories but also to diversifying within each one. This approach helps buffer your investments against volatility in any single asset class.

Create a Strategy for Your Future

Ultimately, your investment strategy should be a reflection of your personal financial journey: your risk tolerance, life stage and long-term aspirations. By carefully balancing high and low-risk assets and diversifying your holdings, you can build a sound strategy.

Constructing the right financial plan can feel overwhelming. Consulting with a financial advisor at Harvest Wealth Partners can provide the personalized guidance you need to navigate your options and build a strategy that aligns with your vision for the future. Contact us to begin.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.