Investing in whisky, like all forms of investment, carries risks. To assess the risks properly, it is good to consider what type of investor you are. This provides guidance when assembling your investment portfolio. There are essentially three forms of investing: defensive, offensive, and neutral. Below, we explain these forms further.
- Defensive investing:
Defensive investing aims to minimize risks. It focuses on achieving a healthy long-term return combined with a small chance of short-term loss. A well-diversified investment portfolio is crucial. Defensive investors always prioritize stability over high returns. A defensive strategy aims at preserving capital, with the potential for slight gains. Because you do not expect high returns, you do not need to take on much risk. - Offensive investing:
Offensive investing aims to maximize returns, requiring more risk. The offensive investor dares to take on this risk and can potentially achieve much higher returns than a defensive or neutral investor. However, losses can also be larger. Offensive investing always involves the possibility of short-term losses, so it is important to maintain a long investment horizon, allowing short-term losses to be offset by years of gains. Offensive investing is not a good choice for the short term.
3. Neutral investing:
A neutral strategy falls between defensive and offensive investing. It involves less risk than offensive investing, but the potential return is also lower. Compared to defensive investors, neutral investors aim for a higher potential return, but this comes with a bit more risk. Risk and return go hand in hand. The neutral investor adopts a longer investment horizon, allowing potential years of loss to be compensated for by years of gain. Within a neutral strategy, some risk is necessary to achieve significant returns. The goal of this strategy is to grow wealth at a well-considered average risk.