Each individual has a risk tolerance that shouldn't be ignored. Any good stock broker or financial planner knows this, and they had better make the effort to facilitate you find out what your risk tolerance is. And then, they had better work with you to get investments that don't exceed your risk tolerance.
Finding out one’s risk tolerance involves many different things. First, you need to know how much money you've to invest, and what your investment and financial goals are.
For example, whenever you plan to retire in ten years, and you have not saved a single penny towards that end, you need to have a high risk tolerance – because you'll need to do some aggressive – risky – investing in order to reach your financial goal.
On the other side of the coin, if you're in your early twenties and you want to start investing for your retirement, your risk tolerance will be low. You can afford to watch your money grow slowly over time.
Realize of course, that your need for a high risk tolerance or your need for a low risk tolerance really has no bearing on how you feel about risk. Again, there's a lot in finding out your tolerance.
For example, whenever you invested in the stock market and you watched the movement of that stock day by day and saw that it was dropping slightly, what would you do?
Would you sell out or would you let your money ride? If you've a low tolerance for risk, you'd prefer to sell out… whenever you have a high tolerance, you would let your money ride and see what happens. This is not based on what your financial goals are. This tolerance is based on how you feel about your money!
Again, a good financial planner or stock broker had better help you find out the level of risk that you're comfortable with, and help you choose your investments accordingly.
Your risk tolerance had better be based on what your financial goals are and how you feel about the possibility of losing your money. It’s all related together.
Finding out one’s risk tolerance involves many different things. First, you need to know how much money you've to invest, and what your investment and financial goals are.
For example, whenever you plan to retire in ten years, and you have not saved a single penny towards that end, you need to have a high risk tolerance – because you'll need to do some aggressive – risky – investing in order to reach your financial goal.
On the other side of the coin, if you're in your early twenties and you want to start investing for your retirement, your risk tolerance will be low. You can afford to watch your money grow slowly over time.
Realize of course, that your need for a high risk tolerance or your need for a low risk tolerance really has no bearing on how you feel about risk. Again, there's a lot in finding out your tolerance.
For example, whenever you invested in the stock market and you watched the movement of that stock day by day and saw that it was dropping slightly, what would you do?
Would you sell out or would you let your money ride? If you've a low tolerance for risk, you'd prefer to sell out… whenever you have a high tolerance, you would let your money ride and see what happens. This is not based on what your financial goals are. This tolerance is based on how you feel about your money!
Again, a good financial planner or stock broker had better help you find out the level of risk that you're comfortable with, and help you choose your investments accordingly.
Your risk tolerance had better be based on what your financial goals are and how you feel about the possibility of losing your money. It’s all related together.
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