Each individual has a risk threshold that should not be overlooked. Any good share broker or financial planner will know this, and they should try to help you determine what your risk tolerance is. Then, they should operate with you to find resources that do not exceed your risk tolerance.
Determining one's risk threshold involves several different things. To start with, you have to know how much funds you have to invest, and what your investment and financial goals are.
For instance, if you have to retire in ten years, and you've not saved any money towards that end, you need to have a high financial risk tolerance - because you need to do some assertive - risky - investing in order to achieve your financial goal.
On the other hand, if you are in your early twenties and you want to start investing for your retirement, your risk tolerance will be less. You can afford to follow your money grow slowly over time.
Realize of course, that your demand for a high risk tolerance or maybe your need for a low risk tolerance basically has no bearing on how you consider risk. Again, there is a lot in figuring out your tolerance.
For instance, if you invested in the stock market and you watched the movement of that stock every day and saw that it was going down slightly, what would you do?
Would you trade 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 might let your money ride and see what happens. This is not in response to what your financial goals are. This forbearance is based on how you feel about your money!
Again, a good financial planning consultant or stock broker should help you identify the level of risk that you are convenient with, and help you decide your investments suitably.
Your risk tolerance should be based on what your financial targets are and how you feel about the likelihood of the loss of your money. It's all linked with each other.
A good financial planning consultant can also advise you on the risk factors of various kind of investment vehicles such as venture capital and seed money investing against putting money in a company going public, or perhaps a reverse merger, or other public mergers.
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