Here are some things to think about when determining the amount of risk that best suits you.
Financial goals. How much money do you want to accumulate over a certain period of time? Your investment decisions should reflect your wealth-creation goals.
Time horizon. How long can you leave your money invested? If you will need your money in one year, you may want to take less risk than you would if you won’t need your money for 20 years.
Financial risk tolerance. Are you in a financial position to invest in riskier alternatives? You should take less risk if you cannot afford to lose your investment or have its value fall.
Inflation risk. This reflects savings’ and investments’ sensitivity to the inflation rate. For example, while some investments such as a savings account have no risk of default, there is the risk that inflation will rise above the interest rate on the account. If the account earns 5 percent interest, inflation must remain lowerthan 5 percent a year for you to realize a profit.
After deciding how much risk you are able to take, you can invest accordingly :
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