When it comes to investing your money, there’s always a risk. Risk is minimal in some cases, while other investments might be incredibly risky. Determine how much you’re willing to risk before you invest.
Risk tolerance assessment is a key step in setting up an investment portfolio. As Daily Worth explains, there’s always a chance that your investments could lose value. Some amount of loss is acceptable (and even expected, as investments tend to fluctuate over time). Decide first how much you’re willing to lose before you take the leap:
Assessing your risk range is a calculated exercise that considers your time frame for meeting specific financial goals, investing experience and comfort level with worst-case scenarios. Even if you’re young and have a long-term horizon, you may not necessarily be comfortable investing aggressively.
Your personal risk tolerance level will vary depending on the state of your finances, so there’s no right answer for where to set this level. The important thing is that you have a well-defined tolerance level and stick with it.
Do You Look Before You Leap? [Daily Worth]