08 Determine Your Risk Tolerance

Determine Your Risk Tolerance


Each individual has a risk tolerance that should not be ignored. Any good stock broker or financial planner knows this, and they should make the effort to help you determine what your risk tolerance is. Then, they should work with you to find investments that do not exceed your risk tolerance.

Determining one’s risk tolerance involves several different things. First, you need to know how much money you have to invest, and what your investment and financial goals are.

For instance, if you plan to retire in ten years, and you’ve not saved a single penny towards that end, you need to have a high risk tolerance – because you will need to do some aggressive – risky – investing in order to reach your financial goal.

On the other side of the coin, if you are 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 is a lot in determining your tolerance.

For instance, if you invested in the stock market and you watched the movement of that stock daily and saw that it was dropping slightly, what would you do?

Would you sell out or would you let your money ride? If you have a low tolerance for risk, you would want to sell out… if 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 should help you determine the level of risk that you are comfortable with, and help you choose your investments accordingly.

Your risk tolerance should be based on what your financial goals are and how you feel about the possibility of losing your money. It’s all tied in together.

 

 
Translate Page Into German Translate Page Into French Translate Page Into Italian Translate Page Into Portuguese Translate Page Into Spanish Translate Page Into Japanese Translate Page Into Korean

More Articles

 

 

Search This Site

 

Related Products And FREE Videos





More Articles


01 Avoiding Impulse Spending

... or partner complain that you spend too much money? 2.) Are you surprised each month when your credit card bill arrives at how much more you charged than you thought you had? 3.) Do you have more shoes and clothes in your closet than you could ever possibly wear? 4.) Do you own every new gadget before ... 

Read Full Article  


14 How Much Money Should You Invest

... It is important to keep three to six months of living expenses in a readily accessible savings account don t invest that money! Don t invest any money that you may need to lay your hands on in a hurry in the future. So, begin by determining how much of your savings should remain in your savings account, ... 

Read Full Article  


05 Why Should I Make A Budget

... on lunch from five dollars a day to three dollars a day on every work day in a five day work week saves $10 a week $40 a month $480 a year $2400 in five years .plus interest. See what I mean it really IS the little things and you still eat lunch everyday AND that was only one place to save money in your ... 

Read Full Article  


17 Investing For Retirement

... However, after the Enron upset and all that followed, people aren t as secure in their company retirement plans anymore. If you choose not to invest in your company s retirement plan, you do have other options. First, you can invest in stocks, bonds, mutual funds, certificates of deposit, and money market ... 

Read Full Article  


16 Investing Basics

... It is important to remember that few investments are a sure thing there is the risk of losing your money! Before you jump right in, it is better to not only find out more about investing and how it all works, but also to determine what your goals are. What do you hope to achieve with your investments? ... 

Read Full Article