Understanding your risk tolerance is key to starting the process of investing money to earn financial rewards. Learn how to assess and evaluate them here!
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The Beginner's Guide to Investing: Understanding Your Risk Tolerance
1. Investing
U N D E R S T A N D I N G Y O U R R I S K T O L E R A N C E
A B E G I N N E R ' S G U I D E T O
2. Where do I start?
When looking to invest for the first
time, it is important to understand
what you want to invest, where you
need to invest it, when to invest it,
and why you are investing it.
3. Topics of
Consideration
The first subject you want to consider
when assessing your risk tolerance is
what goals you have in mind for your
investments.
The second subject you want to
consider is your risk personality to help
determine the level of comfort you
have with varying degrees of risk.
5. An eighty year-old person looking to stabilize
his/her investments versus a twenty-two year-
old who is just starting his/her career will
certainly have different levels of risk they are
willing to take. The eighty year-old is looking
to make low-risk investments that will probably
earn a much lower interest rate, say of one or
two percent.
A Senior Citizen
6. The twenty-two year old is earning his/her full
living from the job he/she has. The twenty-
two year old may be willing to invest a large
chunk of his/her savings with a higher interest
rate that is more risky, because he/she does
not need the principal nor the interest for a
long time.
A 22 Year-Old
7. Varying Income Levels
If you are a billionaire, who makes
$5 billion annually, you may choose
to invest $3 million in the blink of an
eye without much thought to it. This
objective is vastly different than,
let’s say, newlyweds who are looking
to save for their first house. The
billionaire might decide to invest in
a risky real estate investment.
The newlyweds might decide to
invest in bonds or CDs. Identifying
your goals will become clearer for
you once you understand your
investment personality.
9. One’s investment personality is defined by two
specific character traits. One is simply how
daring and risky are you. Two is about how
much time and effort you’re willing to invest
into researching before deciding on a
particular investment.
Two Things to Consider
10. Risk is defined by the possibility of loss on your
investments. The rewards you might receive
are defined by the possibility of earning
greater returns than you invested. If you are
the kind of person who likes to live life on the
edge, experience new adventures constantly,
and have great confidence in your decisions
and thoughts, then you might be willing to take
on higher-risk investments.
Being Risky
11. If you, on the contrary, are the kind of person
who likes to make sure you are stable, secure,
and have low worry/stress, then you may want
to make an investment that is lower risk, which
unfortunately has lower immediate reward.
This decision is extremely personal and can
only be determined by you.
Being Safe
12. “Market risk,...
“Business risk,...
“Political risk,...
“Currency risk,... [and]
“Concentration risk.”
Find out more about these risk factors here: http://bit.ly/1PyDJGb
Risk Factors to Consider
13. Unsure of how to assess
your level of risk? Take the
quiz at the link below!
http://bit.ly/1rmlGWT
Risk Tolerance Quiz
14. Are you afraid of getting your hands dirty just
yet? Try this free investment simulator, provided
by Investopedia, to see how you would do if you
had $100,000 to invest!
http://bit.ly/1HrYZtl
Free Investment Simulator
15. I N T E R E S T E D I N L E A R N I N G M O R E A B O U T
I N V E S T I N G ? C O M E B A C K I N A F E W W E E K S
T O S E E M O R E O F “ A B E G I N N E R ’ S G U I D E
T O I N V E S T I N G . ” I N T H E M E A N T I M E ,
F O L L O W M E O N T W I T T E R F O R W E A L T H
M A N A G E M E N T U P D A T E S , N E W S , A N D
T R E N D S @ E R I C A H I L L _ K W !
16. Thank You
F O R L I S T E N I N G
E R I C A H I L L . N E T