“Should I invest in aggressive investment or conservative investment?”
This is one of the most common questions often asked by the public. We all know that aggressive investment implies potential higher return, but it always comes with higher risk. While conservative investment implies potential, or sometimes guaranteed lower return but it always comes with a lower risk.
There are usually two types of answer from the investors and non-investors. Investors will always argue that aggressive investment is the best choice because conservative investment can’t even beat the inflation rate. Non-investor will always defend that conservative investment is the best choice as it possesses lower risk of losing capital.
However, all the above said reasons should not be the primary factors when we decide on which investment tools to invest in. Instead, we should be more concerned on whether the investment tool can help us to achieve our goals.
Below are two scenarios to illustrate the above argument.

Mr. A
Current age: 40 years old
Desire retirement age: 60 years old
Life expectancy: 99 years old
Annual retirement income needed at current value: RM60,000
Inflation rate: 5%
Target annual return after retiring: 5%
Current investable asset: RM1 million
After some calculation, Mr. A find out that he needs to have a total of RM6.28 million of retirement fund at the age of 60 to sustain his life until 99 years old. With the investable asset of RM1 million that Mr. A has, he needs to expect 10% annual return for 20 years to grow his RM1 million to RM6.28 million.
For Mr. A to gain 10% annual return, he would have to choose moderate to aggressive investment tools. He can have a combination of few investment tools in his portfolios such as stocks, derivatives, equities unit trust fund and P2P financing to generate potential 10% annual return.
However, it is definitely a wrong decision for Mr. A to invest his money into conservative investment tools such as fixed deposit, money market fund or savings account. This is because these financial tools are not able to deliver a potential of 10% annual return for Mr. A.
Choosing any investment tool that is unable to help Mr. A to achieve his retirement goal, which is to have a total of RM6.28million at the age of 60, is considered a wrong investment decision.
Despite some of the aggressive investment might be risky and volatile, investor can still mitigate the risk by doing proper research regarding the investment tools before making decision, diversifying the investment portfolio, knowing the investment horizon, and only investing through the legal platform.
As what Warren Buffet said: “Risk comes from not knowing what you’re doing.”
But, does this means that if an investor choose to invest in conservative investments is wrong?
The answer is NO.

Mr B
Current age: 60 years old
Desire retirement age: 60 years old
Life expectancy: 99 years old
Annual retirement income needed at current value: RM60,000
Inflation rate: 5%
Target annual return during retirement: 0%
Current investable asset: RM6.85 million
Mr. B goes through the same calculation, he finds out that he needs RM6.85 million to sustain his life until 99 years old and he already has RM6.85 million in hand.
In this case, Mr. B does not need to invest his money at all as his retirement goal is already met. So, it is alright for Mr. B to keep all his retirement fund in conservative investment tools such as fixed deposit, money market fund or even savings account.
Whereas it might be a wrong investment decision to Mr. B if he choose to invest the retirement fund in an aggressive investment tool because he might risk losing the capital which will then affects his retirement plan.
Hope that these two scenarios can clear the doubt when making an investment decision.
About the Author
Angel Chan is a Licensed Financial Planner attached to UOB Kay Hian Wealth Advisors Sdn Bhd. Besides providing comprehensive financial advisory to her clients, she is also committed to educate the public about the correct financial management mindset and methodology through article, YouTube video and Financial Management Workshop conducted by her and the team.
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