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Investment Strategies for Risk-Averse Individuals

Ananya Krishna1, Dr. Sumita Dave2

Post Graduate Student, Amity Business School, Amity University Chhattisgarh1

Professor, Director, Amity Business School, Amity University Chhattisgarh2

ABSTRACT

This study aims to explore investment strategies tailored for risk-averse individuals, who prioritize capital preservation over potential gains. Investing is vital for achieving financial independence and countering inflation, with a strong portfolio often emphasized by thought leaders like Warren Buffett. While high-risk investments can yield significant returns, low-risk options are essential for financial stability, especially for those averse to risk. The paper delves into risk aversion, highlighting a preference for security. Risk-averse investors typically opt for low-risk investments such as savings accounts, fixed deposits, municipal bonds, and gold, which provide steady returns but limited growth potential. Strategies like diversification and income investing are recommended to achieve a balance between stability and returns in conservative portfolios. The benefits of risk aversion include lower financial loss and stable income, but drawbacks may include reduced long-term returns and eroded purchasing power due to inflation. Factors influencing risk tolerance, such as age and income level, are also discussed. This study will evaluate various risk-averse investment techniques, including fixed-income investments, diversification, index funds, and conservative mutual funds. It will analyze their historical performance and adaptability to changing market conditions, aiming to empower risk-averse investors to make informed decisions that align with their financial goals.

Keywords: ETFs, risk aversion, capital preservation