Everyone has a “risk tolerance” that they shouldn’t ignore. All good stock brokers and financial planners understand this, so they should do whatever they can to help you determine yours. And then, they need to work with you to help you discover investments that won’t exceed your risk tolerance.
In order to determine your risk tolerance, you need to pay close attention to how much money you have available for investing. You also need to figure out what your financial and investment goals are.
If you’re planning to retire in a few years, for instance, and you have yet to save a single dime, you should have a high risk tolerance. This is because you’ll have to be aggressive and do some risk taking in order to reach your financial goals with investing.
On the flip side, if you’re in your late teens or twenties and you want to go ahead and plan your retirement saving now, you will have a low risk tolerance. You’ll have plenty of time to sit back and watch your money grow.
You need to realize though that your high risk or low risk needs really doesn’t impact how you feel about risks. There is a lot to take into consideration when determining your risk tolerance.
For example, if you end up investing in the stock market and you witness the stock dropping slightly each day, what do you think you’ll end up doing?
Would you go ahead and sell it all out or would you let it go with the ride? If your risk tolerance is low, then you should consider selling out. If you have a high risk tolerance, then you could let the money ride on and wait to see what happens. This tolerance should be based on how you yourself feel about money!
A good stock broker or financial planner will help you with determining your level of risk, especially one that you’re comfortable with. They will also help you pick out the investments that will best suit you.
Your risk tolerance needs to be based on your financial goes and the way you feel about the chances of you losing money. All of these factors are tied in together.
6 Dec
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