There is no one way, no 'right answer' when it comes to investing. But there are some important things to know and risk tolerance is key.
Your risk tolerance- Gauged generally with a questionnaire, risk tolerance measures how you would feel in the ups and downs of stock market movement. Generally we all want our money to go up, but are less inclined to have it go down. Risk tolerance is not an exact science. There is no Vulcan Mind-meld that can ascertain your tolerance. Generally, your risk tolerance helps compile what mix of investment types you might hold, what your 'portfolio' might be, all stocks, all bonds or a mix of stock and bonds. And depending who you ask there are just a few, or many categories. As I said, this is not an exact science.
What is risk?- In life risk is the possibility that things will go wrong. In finance risk is the possibility things will go wrong and negatively affect your investments. As you may have realized, life has no guarantees. So the more you learn and experience your risk tolerance may change.
Even with fear or optimism, you sometimes have flexibility in your risk tolerance. You can take some more risk and be within your tolerance, when you feel more comfortable with the investment, the holdings, the companies in which you are investing. You have more capacity for risk- meaning being able to accept more or less risk- when you are investing in things you understand more than just when you have a vague idea of something called the 'stock market.'
For instance if you understood one mutual fund held companies that manufacture and distribute cat food, ice cream, or held companies that own chain coffee shops and other companies providing products or services that are explained to you and that you perhaps frequented, you may find that you have the risk capacity to invest in such a fund.
Educate yourself- One study by Fidelity investments found that younger investors were as conservative as their Baby Boomer counterparts. because they all considered themselves 'beginner investors.' A spokesperson for Fidelity states in the same survey that 'time is one of the biggest factors when determining assets allocation.' I don't know that I agree that time is the biggest factor in asset allocation. I think it's an obviously important factor. But I think your risk tolerance is more a part of who you are as an individual and that time, your goals and personal circumstances all add in to tweak that basic risk tolerance.
Certain times in your life your personal circumstances may change so that you feel more risk averse or more open to risk. Remember, that this is not an exact science.
Marion Syversen, MBA
Check out our website that includes weekly streaming videos
The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from any computer.
Email management, archiving & monitoring technology powered by Smarsh, Inc.
Only securities and advisory services offered through Wall Street Financial Group, Inc. Registered Investment Advisor. Member FINRA/SIPC. Wall Street Financial Group, Inc., Norumbega Financial and all other entities listed herein are separate entities, independently owned and operated.
TV5 Forecast Center
A Look at Risk Tolerance
Fields marked with a * are required.
Want a personal picture next to your comment? Sign up for a free Gravatar or post with your facebook account.
Breaking News from CBS
When Kari Baker's death was ruled a suicide in April 2006, law enforcement thought the case was closed. And it might have been, if not for Kari's mother and a growing circle of family, friends, investigators, attorneys and others who were convinced Kari had been murdered by her husband, Baptist Preacher Matt Baker, and were determined to get justice no matter how long it would take.
Four months after Kari Baker's death, police question Vanessa Bulls about her relationship with Baptist preacher Matt Baker. They believe she knows more than she's saying.
Video: 5/25: Cold start to summer season for Sandy-impacted shore towns; Therapy dogs help victims in distress
Towns along the Jersey Shore hard hit by superstorm Sandy kicked off the summer season this Memorial Day weekend on a cold and wet note; and therapy dogs were at the Boston bombings and most recently when the Oklahoma tornado hit. Scientific evidence has proven that therapy dogs can effectively lower blood pressure and anxiety for victims of disasters and illness.
Visitors will now be able to behold Vegas' iconic signs in their luminescent glory as museum extends its hours for nighttime tours
Authorities search for missing pilot after nonprofit group's twin-engine plane crashes in wooded area