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How Much of a
Risk-Taker Are You?
Every individual has his own threshold levels beyond which he can
not take any more risks. Any responsible and reputed stock broker
or finance planner will help you in realizing this threshold level
unless he has already been able to assess it with his professional
expertise. After gauging your level of risk tolerance, they should
work in conjunction with you regarding all future investments,
where you can stay within comfortable limits of your risk-bearing
ability.
There are a few things you need to bear in mind before you can
assess your independent risk-taking ability. For instance, things
like how much money you can invest, what types of investments you
want to get into and what your ultimate financial goals are.
For instance, imagine a situation where you have only ten years to
retire and you do not have much money saved up. Here you have to
be really cautious with your investments and do some very
high-risk planning to reach your financial goals. This is because
your steady source of income from your job may cease from the day
you retire.
On the other hand, if age is on your side, and that is if you are
in your early twenties, and wish to start in investing in stocks
to make adequate money for retirement, your risk tolerance is low.
This means you are at an age, when you are capable of taking high
risks, as time is in your hands and can watch your investments
grow with time.
Remember one crucial thing about your risk taking ability. Whether
you have high or low risk tolerance, it has nothing to do with
what your thoughts are on ‘risk’ as a concept. There are a lot of
factors which are involved in determining a person’s risk
tolerability.
Suppose you have invested in stocks and are watching the stock
movements daily and very keenly and see the stock values drop
slightly. What would be your immediate reaction?
If you have a very low risk tolerance you would jump and sell your
stocks fearing it might drop further and you are going to lose all
your money. If you were a high risk taker, you would wait and
watch and let the money ride and takes its own time to grow again.
A good and trusted stock broker would take into account your risk
tolerance levels and advise you accordingly – which stocks to
invest in and which not to, depending on much you can tolerate the
turbulence of the stock market.
Risk tolerance is determined by what your financial goals are: how
much money you wish to make and within what time frame. Another
factor is how you feel about losing money. Sometimes you might
have to lose lots of money. These factors are all inter-related in
determining a risk tolerance level of an individual.
Article Source:
http://www.imargin.com |
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