Everyone has a risk tolerance that should not be ignored. Each broker or financial advisors well know, and should make the effort to help determine what your risk tolerance is. Then you have to work with you to find investments that do not exceed your risk tolerance.
Determine your risk tolerance involves several things. First, you need to know how much money you have to invest and what your investment and financial goals.
For example, if you plan to retire in ten years, and you have not saved a penny for this purpose, you must have a high risk tolerance - because you need to do some 'aggressive - risky - investing in to achieve your financial goal.
Other side of the coin, if you are in your early twenties and you want to start investing for retirement, your risk tolerance will be low. You can afford to watch your money to grow slowly over time.
Realize of course, that your need for a high risk tolerance and your need for a low risk tolerance really has no impact on how you feel about risk. Again, there is a lot in determining your tolerance.
For example, if you invested in the stock market and you saw the movement of that stock daily and saw that she had fallen a bit, 'what would you do?
Want to sell or if you let your money ride? If you have a low risk tolerance, you want to sell ... if you have a high tolerance, you should let your money ride and see what happens. This is not based on what your financial goals. This tolerance is based on how you feel your money!
Again, a good financial planner or stock broker should help determine the level of risk 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 together.
