‘Anyone seeking a high return on the stock market has to accept more risk. And more risk means a bigger chance of fluctuations in the market along the way.’
This is primarily how banks have looked at your profile as an investor for decades. The way you cope with ups and downs is used to measure the ‘risk’ parameter. It determines whether you are a defensive or highly dynamic investor or somewhere in between.
Besides this rational element, however, investing is also linked to an emotional decision-making process. We’re all different when it comes to how we react to interim rises and falls on the stock markets. Investors with precisely the same defensive profile can react differently to those ups and downs.
If the stock market falls for several days in a row, Defensive Investor A wants to respond immediately. Defensive Investor B, by contrast, shrugs their shoulders and takes another look at their investments a month later.
Here at KBC Brussels, we think we can do better than the traditional
approach, in which return and volatility (those ups and downs) are the
criteria. Which is why we now go a step further: full account
should also be taken of your peace of mind.