Research shows that women are usually less comfortable with investment risk than men. While taking fewer risks can help ensure that you don’t lose money, this approach can work against you as well. Safety and security sometimes come at a price: you may lose out on the growth you need to meet your needs.
3 factors that can affect your risk tolerance
- Your money personality – what are your values and attitudes about money? Are you a saver or a spender? In general, are you confident or cautious with your money?
- Time horizon – when will you need your money? For goals that are 5 years away or sooner, you might consider lower-risk investments that are easy to turn into cash. But for goals that will take longer, you may have more time to make up losses if you take additional risk.
- InvestmentInvestment An item of value you buy to get income or to grow in value.+ read full definition knowledge – Make sure you understand what you’re investing in, and know how to balance your asset mixAsset mix The percentage distribution of assets in a portfolio among the three major asset classes: cash and cash equivalents, fixed income and equities.+ read full definition to meet your needs. Test your knowledge with the Investor Knowledge Quiz.
Everyone’s investment risk tolerance is different.
One way to manage risk is through creating a diversified investment portfolio. A financial advisor can help you decide on an appropriate asset mix and create an investment plan that fits both your risk tolerance and your goals.
Dealing with risk is a part of everyday life – some people are comfortable with lots of risk; some, not at all. Find the risk-reward balance that works for you.
Generally, the higher the potential return of an investment, the higher the risk.