A Beginner’s Guide to Investment Profiling – What Kind of Investor Are You?

The big picture: The financial landscape is undergoing significant transformation due to the rise of decentralized finance (DeFi) and blockchain. Traditional finance is intersecting with new digital assets like cryptocurrencies and NFTs, and this warrants a new strategy when diversifying while at the same time recognizing your own investment profile.

[This article is in collaboration with PDAX. Make your next money move with PDAX by signing up here!]

By the numbers:

• 68%: Chance of stock value growth over a year, according to historical data from 1871 to 2012.
• 80%: Probability of value growth over five years.
• 100% ROI: Over a 20-year period.
• 80%: Percentage of Taiwanese investors who initially lost money before seeing returns (1992-2006 data).

In an era where financial markets are increasingly complex, this guide offers individual investors the tools to make informed decisions. It will provide you with a step-by-step approach to understanding personal financial situations, risk tolerance, and investment goals.

Guide to Investment Profiling for Beginners

What is an Investment Profile? An investment profile is a comprehensive overview of an individual’s financial situation, goals, and risk tolerance. It serves as a foundational tool for making informed investment decisions and typically includes the following elements:

• Personal Information: Age, education, income sources, family business.
• Financial Situation: Preparedness to invest without needing immediate liquidity.
• Risk Tolerance: Willingness to lose a certain percentage of the portfolio.
• Risk Capacity: Maximum tolerable loss.
• Investment Allocation: Distribution across various assets like BTC, ETH, stocks, and bonds.
• Time Frames for Investments: Duration for holding investments.
• Investment Objectives: Goals such as target ROI before withdrawal.
• Expectations: Market trends and timelines.

Creating an investment profile helps align investment strategies with financial goals and risk appetite, providing a clear roadmap for both traditional and crypto investments.

Steps to Create an Investment Profile

1. Assess Financial Situation: Evaluate income, expenses, and savings. Ensure you have sufficient funds without compromising your financial stability.
2. Define Investment Goals: Clarify the purpose of your investments, whether for future security, such as education or buying a home, or for discretionary spending.
3. Determine Risk Tolerance: Understand your emotional response to potential losses. Assess how much risk you can handle and plan exit strategies accordingly.
4. Determine Preferred Investment Horizon: Decide how long you intend to hold your investments based on their purpose.
5. Understand Different Asset Classes: Differentiate between low-risk assets like government bonds and high-risk assets like cryptocurrencies and stocks.
6. Diversify Portfolio: Spread investments across various assets to mitigate risks.
7. Review and Rebalance Portfolio Regularly: Continuously assess and adjust your asset allocation based on performance.

How to Start Your Investment Journey in the Philippines

There is a crypto exchange in the Philippines called Philippine Digital Assets Exchange where users can buy not just crypto but other financial products like bonds and NFTs. This allows you to diversify more your portfolio in one single app.

Using PDAX:

1. Download the PDAX app or visit PDAX.
2. Create an account and verify up to Level 2: Requirements include an email address, mobile number, valid ID, and selfie verification.
3. Cash-in and transfer funds: Once verified, transfer your investment funds to your PDAX wallet to start trading.

Investing in Crypto, Bonds, and NFTs

To invest in crypto through spot trading:

1. Go to the Crypto tab: Choose the token you want to buy.
2. Type in the desired amount: Enter the amount you wish to invest.
3. Hold the asset: Monitor your investment.
4. Withdraw the token: When the desired PNL (Profit and Loss) is reached, withdraw your funds.

To invest in bonds:

1. Go to the Bonds tab: Select the bond you want to purchase.
2. Type in the desired amount: Enter the investment amount.
3. Hold the asset: Wait until the bond reaches its maturity date.
4. Withdraw the funds: At maturity, withdraw your investment.

To invest in NFTs:

1. Go to the Collectibles tab: Choose the NFT you want to buy.
2. Confirm the transaction: Complete the purchase.
3. Hold the asset: Maintain ownership until a suitable resale opportunity arises.
4. Sell the NFT: Use a secondary marketplace to sell your NFT.

The Bottom Line

A detailed investment profile is critical for aligning your investment strategies with your financial goals and risk tolerance. By following the steps outlined in this guide, you can make more informed and confident investment decisions, whether you’re navigating traditional finance or the dynamic world of cryptocurrencies and NFTs.

This article is published on BitPinas: A Beginner’s Guide to Investment Profiling

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