Risk profile

The risk profile is the result of an investor's willingness and ability to take risks. It shows how much and what kind of risk the investor is willing to take. Unfortunately, the risk profile is often just a dream, market conditions distort the picture.

The risk profile is essentially suitable for describing the expected investment steps of a typically private investor. For this, your willingness and ability to bear risks must be properly known. Of course, you can't read the future from it, but it's important to us because if we're looking for an investor, it's definitely not worth negotiating with those whose risk profile our company doesn't fit. 

One leg of the risk profile is a willingness to bear risks, which essentially tells us what kind of compromises the given investor makes at a certain cost level for the expected yield and risk. By default, it is true that riskier investments should promise higher returns, and lower-risk ones should promise lower returns. 

Every investor has an idea of what kind of risk he is you want to make a profit, this is his willingness to bear risks. However, the conditions are not always right for you to find such an investment, so your willingness to bear risks is not constant, since you still have to do something with the money. 

In recent years, for example, returns on less risky investments have declined worldwide, forcing investors to turn to riskier investments if they were not satisfied with essentially zero returns. Overall, therefore, the willingness to bear risks has increased. 

The risk bearing capacity it shows what exposures the investor can undertake. For example, it is no use having a large fortune if we are also deeply in debt. In such a case, we can only make new investments to a very limited extent. Exactly where this limit is is determined by our willingness to bear risk, but there is definitely an upper limit. 

The reverse is also true: we can pay a better price for a selected company even compared to a seemingly richer competitor if we are less in debt. However, this can only happen if our willingness to bear risks is high enough.