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Created on 19.02.2018 | Updated on 13.05.2019

An investment recommendation – what’s that?

You would like to invest money, so you arrange an appointment. First, the consultant determines your investor profile, which consists of your risk capacity and risk appetite. This is used as the basis for creating your personal investment recommendation.

A diagram showing a pie chart at the top labelled “goals and life situation”, and which is divided up equally into the following parts: “life situation”, “life stage”, “personal goals”, “financial situation” and “requirements”. An arrow pointing to the words “risk capacity” and “risk appetite” together with a plus sign pointing to the “investment horizon” indicate a second pie chart labelled “wealth distribution in asset categories”: “world equities”, “Swiss equities” “bonds in CHF” “bonds in foreign currencies” “risk appetite” and “alternative investments”.

What level of risk can you afford to assume?

Risk capacity  is determined based on your personal and financial situation. For this reason, your advisor will ask you questions about your current personal and professional situation, your income, your savings, your financial commitments and your plans for the future. Your risk capacity is greater if you are less dependent on the capital invested. This means that if you have savings that you won’t need for daily living expenses in the near future, your risk capacity is greater. However, if you have children, your risk capacity may be lower, as you have less disposable income.

What level of risk would you like to assume?

Your risk appetite  is determined based on your personal attitude towards risk and opportunity. In contrast to the assessment of risk capacity, which is based on objective criteria, risk appetite depends heavily on your personality and attitude. Risk appetite therefore tends to be determined more by emotional factors.

For how long do you wish and are you able to invest?

In addition to your risk capacity and appetite, your personal investment horizon is also an important consideration when an investment recommendation  is drawn up. Your investment horizon is the period over which you wish to invest. This means you have to consider how long you wish to invest your money for and the period of time during which you will not need it for other things. For example, if you are planning to take a training course or a major trip in four years’ time – for which you need the money – this may determine your investment horizon.

An investment strategy is based on an investor profile and investment horizon

Based on the analysis of your personal investor profile  and your investment horizon, your advisor then produces an investment recommendation (also referred to as an investment proposal or investment strategy) for you. This recommendation contains specific proposals and information on the composition of the financial instruments – for example, shares , bonds  or funds  – in which investors are best advised to put their money.

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