What is risk tolerance?
When it comes to investing there’s lots of talk about “risk tolerance.” But what is it? And how can we determine your individual tolerance for risk?
Put simply, risk tolerance is the amount of risk you’re willing to accept when investing. For many investors, risk and risk tolerance are focused on the possibility of losing money. That’s important to your investment life, because as potential returns rise, so does risk.
A key factor in dealing with risk is time horizon. With long-term objectives in place, the short-term ups and downs of financial markets don’t matter as much. They’re often described as “speed bumps” on the road to long-term investment success.
We can help you explore your personal risk tolerance through a series of questions designed to help determine the risks you’re comfortable with. We’ll pay close attention to how you react to the risk profiles of different types of investments and to events such as market volatility.
If you are feeling anxious about your investments or can’t sleep because of them, that’s a tell-tale sign your risk tolerance is out of whack. If that’s the case, we’re here to help.