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.

Recent Investment Buzz

Good Advice: Hold off on financial stocks - "Be cautious and wait for clarity. Don't worry about missing the bottom of the market, because right now, there are too many unknowns. Stay away until there's vision. If you're going to invest in the sector, make sure you know what you're investing in. Don't take a flier on something and hope." He says. [Read More...]

WSJ.com - Ten Investments to Watch in 2009 - Here's one financial prediction you can rely on: Whatever happens in world stock markets next year, it won't be as bad -- at least in dollar terms -- as 2008. [Read More...]

Las Vegas investment firm - Comprehensive Financial Services - Life Settlements, Stock Market and Real Estate Investment Options. Located in Las Vegas but can help investors in all 50 states. [Read More...]

Stock Market Terms, All about Stock market - Stock Market Terms - Meaning and Defination, Stock Market Dictionary: Stock Market Terminology & Concepts. Share Trading Glossary, Financial Terms , Investment Terminology in Indian Stock Market Trading, Understanding NSE,BSE, SENSEX, NIFTY. [Read More...]

"DoublingStocks" Review: What Is It and Who's Behind It? - "With more and more people jumping into Investing on their own, the market is flooded with good intentions that often don't turn out for the best. You need a Stocks/Options trading system that can help to demystify the world's financial markets!" [Read More...]

How to Find a Financial Adviser that Fits Your Personality | - Many investors find that they do not have the time or energy needed to be successful in the stock market. Some may turn to investment brokers for guidance, which may or may not be a good thing depending upon your circumstances. Whatever decision you arrive at, the following steps will help you find a financial adviser that fits your personality. [Read More...]