Your risk profile deals with evaluating your attitude to risks.

All investments involve some degree of risk. If you intend to purchase securities – such as stocks, sukuks, or unit trust funds – it is necessary that you recognize before you invest that you could lose some or all your money. Unlike deposits at banks, the money you invest in securities normally is not insured. You could lose your principal, which is the quantity you’ve invested. That’s even if you purchase your investments via a bank.

The reward for taking on risk is the reward of an increased investment return. If you have a monetary goal with a long-time horizon, you are likely to make better returns by way of cautiously investing in asset categories with increased risk, like shares or sukuks, alternatively than restricting your investments to asset classes like property with less risk or cash equivalents. 

On the other hand, investing entirely in money investments can also be terrific for momentary financial goals. The essential subject for individuals investing in cash equivalents is inflation risk, which is the risk that inflation will outpace and erode returns over time.