Being willing to risk losing your money is your risk tolerance.
Are you willing to go for higher returns and risk losing your money or are you willing to have lower returns in order to keep your money safe.
If you are a person who does not have a problem with risking their money for high returns you are considered an aggressive investor.
On the opposite spectrum is the low tolerant investor also known as a conservative investor willing to keep their capital intact and get lower returns.
There are obviously investors found in the middle spectrum of medium tolerance.
It is of the utmost importance to know your tolerance level before you start your investing.
Your planner should guide you in this decision.
This is to make sure they only look for certain investments that go along with your tolerance.
Take these things into mind when your are calculating your tolerance level: 1) You need to figure out how much money you will use for your investments and how that relates to your total net worth.
If you were planning to invest 5% of your money for instance your tolerance would differ somewhat with someone planning to invest 75% of theirs.
It will probably be lower in the former example and higher in the latter example.
What do you want to achieve financially? Are you middle aged and looking for retirement money? You will be trying to make money quickly therefore you will have high tolerance for risk.
When you are a 20 year old however you have time to go slow and be conservative and therefore have lower risk tolerance.
3) Your age is a big factor in determining how much risk you can take.
For instance if you are an 80 year old retiree you will probably have a low risk tolerance as you do not have time to recoup any losses that might occur.
Whereas if you were a 25 year old you have more time to recoup losses so you can afford a higher risk tolerance Your risk tolerance is usually not really about what you think about risk more about how you feel about your money.
If you saw a stock investment you have invested in start to drop what would you do? What would you do sell quickly or wait to see what will happen.
If you are not willing to lose your money then you would immediately get out but if you are not affected by the prospect of losing money then you would wait to see what happens.
Thus does not have to do a lot with your financial goals as much as your feelings about your money.
Make sure if you have a broker, planner or advisor that they help you with this decision.
They should help you determine your level of risk and then choose the right investments which complement your risk tolerance Risk tolerance is found by assessing your financial goals, your age and also your feelings towards your money.
Also note that your risk tolerance is only one of the factors to consider when looking into what you invest in.
Its just one piece of the puzzle so research more and keep informed.
Are you willing to go for higher returns and risk losing your money or are you willing to have lower returns in order to keep your money safe.
If you are a person who does not have a problem with risking their money for high returns you are considered an aggressive investor.
On the opposite spectrum is the low tolerant investor also known as a conservative investor willing to keep their capital intact and get lower returns.
There are obviously investors found in the middle spectrum of medium tolerance.
It is of the utmost importance to know your tolerance level before you start your investing.
Your planner should guide you in this decision.
This is to make sure they only look for certain investments that go along with your tolerance.
Take these things into mind when your are calculating your tolerance level: 1) You need to figure out how much money you will use for your investments and how that relates to your total net worth.
If you were planning to invest 5% of your money for instance your tolerance would differ somewhat with someone planning to invest 75% of theirs.
It will probably be lower in the former example and higher in the latter example.
What do you want to achieve financially? Are you middle aged and looking for retirement money? You will be trying to make money quickly therefore you will have high tolerance for risk.
When you are a 20 year old however you have time to go slow and be conservative and therefore have lower risk tolerance.
3) Your age is a big factor in determining how much risk you can take.
For instance if you are an 80 year old retiree you will probably have a low risk tolerance as you do not have time to recoup any losses that might occur.
Whereas if you were a 25 year old you have more time to recoup losses so you can afford a higher risk tolerance Your risk tolerance is usually not really about what you think about risk more about how you feel about your money.
If you saw a stock investment you have invested in start to drop what would you do? What would you do sell quickly or wait to see what will happen.
If you are not willing to lose your money then you would immediately get out but if you are not affected by the prospect of losing money then you would wait to see what happens.
Thus does not have to do a lot with your financial goals as much as your feelings about your money.
Make sure if you have a broker, planner or advisor that they help you with this decision.
They should help you determine your level of risk and then choose the right investments which complement your risk tolerance Risk tolerance is found by assessing your financial goals, your age and also your feelings towards your money.
Also note that your risk tolerance is only one of the factors to consider when looking into what you invest in.
Its just one piece of the puzzle so research more and keep informed.