What to Do With Your First Savings: A Guide to Investing Based on Your Risk Profile

And it makes sense—these doubts are completely normal, since it’s a significant decision in anyone’s financial life. First, it’s important to understand that investing means using your money to buy something with the hope that it will increase in value over time. For example, you might buy a company’s stock with the goal of selling it later at a higher price and making a profit.

Before you start, it’s crucial to define your objective. Do you want extra income to supplement your pension when you retire? Are you aiming to save a specific amount to pay for your child’s college education? Are you planning to buy a home? 

By asking these types of questions, savers can begin to identify their financial goals. These goals vary from person to person, and depending on what you want to achieve, one type of financial product may be more suitable than another. Moreover, your priorities can change over the course of your life as an investor.

Another important step before you start investing is determining your investor profile, also known as your risk profile. To do this, it’s helpful to conduct an honest assessment of your personal and financial situation—and to reflect on how you might react in different scenarios. For example, how would you respond if you saw your investments drop by 20%?

Traditionally, investors fall into three main categories: conservative, moderate, and aggressive. Defining your profile is essential to selecting investment strategies that best match your circumstances.

• A conservative investor is someone who prefers to minimize risk and values safety much more than profitability. The main goal of this type of investor is to preserve capital. For this reason, they usually opt for low-risk products.

• A moderate investor is willing to take on a bit more risk than a conservative one, but still aims to strike a balance between security and returns. In this case, the products usually have a higher level of risk.

• An aggressive or high-risk investor is someone with a high tolerance for risk. This person is prepared to accept volatility in the hope of earning greater returns.

The financial products selected will depend on the investor’s risk profile. Generally speaking, the more aggressive the investor, the larger the proportion of stocks in their investment portfolio. Conversely, more conservative investors tend to prefer lower-risk, less volatile options. 

They typically choose low-risk financial products—often backed by the Deposit Guarantee Fund up to 100,000 euros. Fixed-income mutual funds, which invest in government or corporate bonds, are also a common choice. 

Moderate investors are open to taking on a bit more risk. They may invest in mixed mutual funds, which combine equities and fixed-income products to diversify their exposure. 

If you're an aggressive investor, you're likely comfortable with higher levels of volatility in pursuit of greater returns. This profile may lean toward investing in individual company stocks or equity mutual funds. 

Regardless of your risk profile, it’s always a good idea to start investing with the support of a financial expert. Professional guidance is key to avoiding common beginner mistakes. MAPFRE offers personalized financial advice through its specialized unit, MAPFRE Gestión Patrimonial, which helps clients reach their financial goals with confidence.

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