Each individual has a risk tolerance that should not be ignored. Any good share broker or financial planner will know this, and they should make the effort to help you find out what your risk tolerance is. Then, they have to work with you to find investments that do not exceed your risk tolerance.
Determining one's risk tolerance involves several different things. To start with, you have to know how much money you have to put in, and what your investment and financial targets are.
For instance, if you plan to retire in ten years, and you've not saved a single penny towards that end, you need to have a high risk tolerance - because you will need to do some assertive - risky - investing in order to achieve your financial goal.
On the other side of the coin, if you are in your early twenties and you like to start investing for your pension, your risk tolerance will be low. You can afford to watch your money grow slowly over time.
Realize of course, that your need for a high risk tolerance or your need for a low risk tolerance basically has no bearing on how you consider risk. Again, there is a lot in determining your tolerance.
For example, if you invested in the stock market and you seen the movement of that stock daily and saw that it was dropping slightly, what would you do?
Would you sell out or would you let your money ride? If you have a low tolerance for risk, you would seek to sell out... if you have a higher tolerance, you would allow your money ride and see what goes on. This is not based on what your financial goals are. This tolerance is based on how you feel about your money!
Again, a good financial planner or stock broker should help you determine the level of risk that you are convenient with, and help you decide your investments accordingly.
Your risk threshold should be in line with what your financial goals are and how you feel about the possibility of losing your money. It's all linked with each other.
A good financial planner can also inform you on the risk elements associated with different kind of investments such as venture capital and seed money investing against putting money in a company going public, or a reverse merger, or some other public mergers.
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