Find Out Your Risk Threshold When Investing

Each individual has a risk tolerance that should not be overlooked. Any good share broker or financial planner recognizes this, and they should make the effort to help you determine what your risk tolerance is. Then, they need to act with you to find investment vehicles that do not exceed your risk tolerance.

Determining one's risk tolerance involves several different things. To start with, you should know how much money you have to invest, and what your investment and financial objectives are.

For instance, if you are retiring in ten years, and you've not saved any money towards that end, you need to have a high risk tolerance - because you need to do some assertive - risky - investing in order to attain your financial goal.

On the other side of the coin, if you are in your early twenties and you want to start investing for your retirement living, your risk tolerance will be lesser. You can afford to observe your money grow slowly over time.

Realize of course, that your need for a high risk tolerance or maybe your need for a low risk tolerance basically has no bearing on how you consider risk. Again, there is a lot in determining your tolerance.

For instance, if you invested in the stock market and you observed the movement of that stock day by day and saw that it was declining slightly, what would you do?

Would you sell out or would you let your money ride? If you have a low tolerance for risk, you would seek to sell out... if you have a higher tolerance, you would let your money ride and see what are the results. This is not driven by what your financial goals are. This determination is based on how you feel about your money!

Again, a good financial planner or stock broker should help you identify the level of risk that you are convenient with, and help you select your investments accordingly.

Your risk tolerance should be according to what your monetary objectives are and how you feel about the possibility of the loss of your money. It's all linked with each other.

A good financial planner can also advise you on the risk elements related to various kind of investments such as venture capital and seed money investing against making an investment in a company going public, or a reverse merger, or other public mergers.

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