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Determine Your Risk Tolerance Before You Start Investing In The Stock MarketPosted by SEP-SOLO-IRA-401k-ROTH on: 2007-05-01 13:58:04 in category:
Investments [ Print | Permalink / 0 Comment(s) ] Jason Dutch Just ask any good stock broker or financial planner: you (yes, even you) have a risk tolerance and that should better not be ignored. A good and professional broker makes the effort to help you determine what your risk tolerance is. From that moment on, the 'pro' should work with you to find investments that do not exceed your risk tolerance. Determining one's risk tolerance involves several things. If you plan to retire in, say, ten years and you've never ever saved a penny you need to do some aggressive and therefore risky investing. You'll need to have a high risk tolerance. But if you are 24 and you want to start investing for your retirement, your risk tolerance will be low. You can afford to watch your money grow slowly but steady. So what it comes down to, is how much money you have to invest and what your investment and financial goals are. So please realize that your NEED for a high or low risk tolerance has no bearing on how you feel about risk. You may well be a risk avoiding person with a need for a high risk tolerance. Again, there is a lot in determining your tolerance. Say you see your stock dropping slightly on an almost daily base. What would you do? Would you sell? Would you stick to it? The right answer should be motivated by your initial investing plan. But with most beginners their personality takes over. If you have a low tolerance for risk, you'd probably sell. If you have a high tolerance, you'd let your money ride. That decision 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. 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. About the author: Jason Dutch writes about money, stocks and investing for beginners. You can find his articles both offline and online in the US and Europe. Her runs a website called www.growmoneygrow.info |
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