Investing always involves a degree of risk. If you plan to buy securities such as stocks, mutual funds, ETFs, or bonds, it is important to realize you could lose some or all of the money you invest. Finding an investment profile that fits your risk tolerance while still allowing you to reach your goals can be a challenge, but it’s not impossible. The first step is finding out what type of investor you are.
Some people don’t mind riding the ups and downs of the market if it leads to higher returns. Aggressive investors are willing to risk losing money to get potentially better results. If you have a longer time horizon to reach your financial goal, you might make more money by investing in assets with higher risk.
Others are willing to sacrifice those higher returns for a smoother ride. These conservative investors favor investments that maintain their original investment. If you have shorter-term financial goals, a lower risk investment may be suitable.
Moderate investors seek to balance risk and reward. They are willing to accept some risk, but are also attracted to investments that are less likely to lose principal.
Curious what your risk tolerance is? Click on Portfolio Risk Analysis link at the top right of this page and discover your risk number.
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