the beginner's guide to investing: understanding your risk tolerance
TRANSCRIPT
InvestingU 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
Where do I start?
When looking to invest for the firsttime, it is important to understandwhat you want to invest, where youneed to invest it, when to invest it,
and why you are investing it.
Topics ofConsideration
The first subject you want to considerwhen assessing your risk tolerance iswhat goals you have in mind for yourinvestments.
The second subject you want toconsider is your risk personality to helpdetermine the level of comfort youhave with varying degrees of risk.
CreatingYour Goals
An eighty year-old person looking to stabilizehis/her investments versus a twenty-two year-
old who is just starting his/her career willcertainly have different levels of risk they arewilling to take. The eighty year-old is looking
to make low-risk investments that will probablyearn a much lower interest rate, say of one or
two percent.
A Senior Citizen
The twenty-two year old is earning his/her fullliving 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 interestrate that is more risky, because he/she doesnot need the principal nor the interest for a
long time.
A 22 Year-Old
Varying Income Levels
If you are a billionaire, who makes$5 billion annually, you may chooseto invest $3 million in the blink of aneye without much thought to it. Thisobjective is vastly different than,let’s say, newlyweds who are lookingto save for their first house. Thebillionaire might decide to invest ina risky real estate investment.
The newlyweds might decide toinvest in bonds or CDs. Identifyingyour goals will become clearer foryou once you understand yourinvestment personality.
Assessing YourRisk Personality
One’s investment personality is defined by twospecific character traits. One is simply howdaring and risky are you. Two is about howmuch time and effort you’re willing to invest
into researching before deciding on aparticular investment.
Two Things to Consider
Risk is defined by the possibility of loss on yourinvestments. The rewards you might receive
are defined by the possibility of earninggreater returns than you invested. If you arethe kind of person who likes to live life on theedge, experience new adventures constantly,and have great confidence in your decisions
and thoughts, then you might be willing to takeon higher-risk investments.
Being Risky
If you, on the contrary, are the kind of personwho likes to make sure you are stable, secure,and have low worry/stress, then you may wantto 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
“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
Unsure of how to assessyour level of risk? Take the
quiz at the link below!
http://bit.ly/1rmlGWT
Risk Tolerance Quiz
Are you afraid of getting your hands dirty justyet? Try this free investment simulator, providedby Investopedia, to see how you would do if you
had $100,000 to invest!
http://bit.ly/1HrYZtl
Free Investment Simulator
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 TI 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 ST 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 HM 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 !
