Evaluate Your Risk Acceptance by Steven Saint-James

The first step involved in investing is to establish your riskacceptance. Any good stock broker or financial planner is aware of this and they should make the effort to help you conclude your risk aversion. Then they should help you identify investments that do not surpass your risk tolerance.



Determining one’s risk tolerance involves several different things. First, you need to determine how much money you have to invest and what your investment and financial goals are.



For instance, if you plan to retire in ten years, and you have not saved a single cent towards that end, you need to have a high risk tolerance – because you will have to do some aggressive – risky – investing in order to reach your financial target.



However on the other side of the coin, if you are just beginning and you want to start investing for your retirement, your risk tolerance will be very low. You can afford to watch your money prosper slowly over time.



Naturally you need to understand that your need for a high risk tolerance or your need for a low risk tolerance really has no influence on how you feel about risk. To reiterate, there is a lot in determining your tolerance level.



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



Would you sell out or would you let your money be? If you have a low tolerance for exposure, you would want to sell out… if your acceptance of risk is higher, you would let your money ride and see what happens. This is not based on what your financial goals are. This acceptance 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 and help you choose your investments accordingly.



Your risk tolerance should be based on what your financial goals are and how you feel about the possibility of losing your investment. It’s all tied in together.


Steven Saint-James is the owner of www.istocksblog.com. He is an online trader and Online Marketing Entrepreneur. For additional information please go HERE


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