Aggressive, moderate & conservative.

Those three are the

typology of an investors attitude towards the risks of
investing.
We need to understand hows our attitude to risk when
investing, as it gives us guidance in forming the best
combination of investment products that suit to our own
appetite to risks.
Some people tend to avoid risk, some are thrill-risk seeker,
some are somewhere in between; and there is nothing wrong
being one of the typology, as everybody has his/her own
unique appetite to risks.

How do we know which one we

are?

I am A CONSERVATIVE !
Where should I put my money?
Finding investment portfolio that suits

Here are some pointers.

Birth order. The firstborn child typically can be a

conservative or can be an aggressive investor.
Firstborn being aggressive usually is a calculated
risk-taker type of investor. The middle child is
usually more aggressive than the firstborn. Last,
the youngest child in majority is an aggressive or
even super-aggressive.

Occupation. An aggressive (calculated risktaker) person loves jobs that needs planning,
preparation, and time limited project based works;
examples are a sales, a contractor, a lawyer, a
trainer, a businessman, or a chief of finance.
Person with moderate risk attitude usually works as
a specialist with general knowledge in other
subjects; examples are a consultant, an athlete, or
a journalist. Person who is conservative typically
have career in a very specific area which need a
special education as well; examples are a doctor, a
teacher/lecturer, or an artist.

Income. Person whose income is from doing

trade, is based on commission or is not fixed
usually an aggressive person. A consultant or a
project based contractor typically are an aggressive
calculated risk taker. Those whose double income

or have salary is made of fixed and variable

portion, usually have moderate appetite on risk.
Person whose income from the salary only, is
typically a conservative one.

Hobby. An aggressive and calculated risk taker

usually enjoys high-risk and outdoor activities like
mountaineering, wall climbing, paragliding, gliding,
free fall, hunting, etc. Moderate person typically
loves group sports like football, basketball, volley
ball. The conservative usually loves individual
activities or sports like swimming, running, fitness,
reading, watching movies, or art.

Age. The younger you are, the more aggressive.

The older you are, you are tend to be more
conservative. One of the hints, if you are between
25-to-45 you can be aggressive. Being in age
between 40-to-55 you can go moderate. More than
55 years old, generally is better to go conservative
when investing.
Now we have some idea to which typology we are
likely fallen into. Now we know what is our own
appetite to risks.

So What?

Lets do a self-check on our current savings or

investments, in particular to look at the portion of
each investment products we own, that in a
financial term it is called as our own investment
portfolio.

As we do a self-check to our current investment

portfolio, we would list down all of our investments,
classify them into the three classes (high-risk,
medium-risk, low-risk products), and make a
valuation on each of the investment product.

Investment products can be classified into three:

high-risk products, medium-risk products and lowrisk investment products. Examples of high-risk
investment products are: stocks, equity mutual
fund, corporate bonds. Example of medium-risk
investment products are: corporate bonds, gold
bar, balanced mutual fund, fixed income mutual
fund. Example of low-risk investment products are:
government bonds, bank savings, time deposits,
money market mutual fund, gold bar, property.

By now, we should know what is the total value of

our investments, and also know the total sum of our
investments which are classified as high-risk,
medium-risk, and low-risk. The next question we
should address: is my current investment
composition or portfolio suit to my current riskappetite?
Fortunately, there is a general guideline on how the
composition of each investment class should look
like, to suit the risk-appetite of an investor. Lets
look at the following pie charts.

What investment products that we currently own?

aggressive

moderate

conservative

Low
Risk,
10%

High
Risk,
10%
High
Risk,
30%

Low
Risk,
30%

Medium
Risk,
15%

High
Risk,
75%

Low
Risk,
60%

Medium
Risk,
30%

Medium
Risk,
40%

Pie Chart: Investment Portfolio Guideline

Source: Cikaldana Financial Advisory

The three pie charts describe a composition of

each investment product class within a total
investment of an investor. We can use those pie
charts as a guideline in judging our current
investment portfolio and further conducting a
portfolio balancing to the investments accordingly.

would consist of high-risk investment products in

majority. A moderate investment portfolio typically
would show a balance mix of investment product
class.

A conservative investment portfolio would consist

a majority portion of low-risk investment products
class. In the guideline pie chart, the total value of
investment which classified as low-risk would be
60% of the total investment, which may be
comprised of bank savings, time deposits, money
market mutual fund, gold bar, and a property. A
30% of the investment would classified as mediumrisk investment product class and the remaining
10% would be high-risk investment products.

Lets assume that we currently have a total savings

and investments in total value of about one point
two billion rupiah (Rp1,200,000,000). How the
savings and investments products would be
distributed?

Accordingly, an aggressive investment portfolio

How do those pie-charts work?

Lets look at the table on the next page. The table

describes the composition of each investment
product class within a total investment held by the
investor, according to the portfolio guideline pie
charts and in term of monetary value (in this case
Rupiah).

33

Table: Example of Investment Portfolio 1.2 BIDR

Approximate Composition (in Rupiah)

Total High Risk
Investment Products

Total Medium Risk

Investment Products

Total Low Risk

Investment Products

aggressive portfolio

900,000,000

180,000,000

120,000,000

moderate portfolio

360,000,000

480,000,000

360,000,000

conservative portfolio

120,000,000

360,000,000

720,000,000

Source: Cikaldana Financial Advisory

Under a conservative investment portfolio, the

total sum value of our investments which are
classified as low-risk investment would be about
720 million rupiah. This amount of low-risk
investment may be comprised of bank savings,
time deposits, some money market mutual fund,
and some gold bars.

All in all
This portfolio guideline should be taken flexibly in
contrast of being a rigid rules of investment
composition. Investment portfolio is dynamic in
contrast of being static.

Besides the low-risk investments, we would also

hold several high-performing corporate bonds,
some balanced and fixed-income mutual fund, that
are classified as medium-risk investment products
in total value of around 360 million rupiah.
In addition, we would also keep several high-risk
investment products like stocks and equity mutual
funds in total value of about 120 million rupiah.

The graphic below illustrates an example of

changes in a persons investment portfolio over the
time (age).
Persons appetite to risk changes over time. As
dynamic as ones appetite to risk, and so does
investment portfolio. Investment portfolio is also a
resultant of combined financial goals. A regular (at
least, an annual) portfolio review and rebalancing
would be recommended in an effort for an
optimized (if not maximized) investment.

Accordingly, the story would go similarly for the

moderate and aggressive investment portfolio.
The difference would be on the numbers.

High-Risk Investment

Medium-Risk Investment

Low-Risk Investment

100%
80%
60%
40%
20%
0%
25

30

35

40

45

50

55

60

65

70

Graphic: The Dynamic of Investment Portfolio over Ages

Source: Cikaldana Financial Advisory

By Iswin Hudiarto
The writer is Principal Financial Planner and Director of Cikaldana Financial Advisory.

PT Cikaldana Korpora Sovereign Plaza 21st Floor, Jl. TB Simatupang Kav.36, Jakarta 12430
P: +62 21 2939 8727 F: +62 21 2939 8898 www.cikaldana.com E-mail: contact@cikaldana.com