Understanding how to determine your risk tolerance is an important early step in investment planning.
How Can You Determine Your Risk Tolerance?
Effective investment planning starts with establishing a firm foundation built on knowing your investment objectives, time horizon, and risk tolerance. The first two are relatively straightforward. If you want a financially independent retirement, for example, that’s your goal and the period between now and when you want to stop working is your time horizon. Your risk tolerance is tougher to figure out. It requires understanding:
Whether you’re a conservative, moderate, or aggressive investor
If you need growth, income, or both
The level of volatility in your portfolio’s value you’re comfortable with
To learn more, download your free guide on determining your risk tolerance.