Profit through knowing your money personality and risk tolerance

Just as important as making, and knowing what your financial goals are, every investor will need to honestly assess their risk tolerance and relationship with money. Not being aware of you risk tolerance, will mean that you are always making investment decisions that leave you anxious or unsatisfied, even when they are financially sound investments.
Many people are quite comfortable with the notion of investing their long term money in relatively high risk, and ergo volatile investment funds. They will not check the markets daily, and have both the psychological stamina and patience to ride out any short term fluctuations in the market without panic selling. This confidence that their investments will do just fine in the end, is the hallmark of most high risk investment strategies.
Many investors though, are either unwilling or unable to deal with all this market uncertainty. Such investors have a need to predictably know, where their investments will be from year to year, or indeed from month to month. Constant fluctuations in the market valuations makes them very uncomfortable. Uncomfortable investors are often unhealthy investors. You are unlikely to be leading a productive life, if you spend every waking moment worrying about your investments, or worse yet, are unable to sleep because you are worried about their performance.
Most investors though, lie somewhere between these two extremes. Knowing just how much risk, and financial uncertainty you are prepared to comfortably live with will be paramount to your investment success. Can you sleep soundly when the market is extremely volatile? Are you able to endure long periods of market stagnation? Are you able to keep sinking money into a falling market, with the expectation of a long term rebound in stock valuations and returns?
There is no point in taking a high risk investment strategy if it means you close out your positions and make a loss at the first signs of market jitters. A good investment strategy poorly executed is almost invariably worse than not having the right strategy to begin with. The markets can be extremely volatile too. Daily movements of several percent are not uncommon in some markets. Penny stocks are often liable to have significantly high daily volatility.
Discussing money and investments in the abstract rarely leads to the right conclusions though. If you are uncertain exactly where your risk tolerance lies, a good idea is to begin by investing the bulk of your money in low risk investments. The rest can then be invested in the more risky, high growth funds. You can then steadily increase (or reduce) the proportion of your money you put in such funds, until you reach your risk-profile comfort level.
Making such a decision based on real money invested, will give you a far truer picture of your investment personality, than you could ever achieve from talking to all the investment advisers on the planet. Knowing your true risk profile will also allow you to develop an overall investment plan that is most profitable for you, whilst allowing you to sleep soundly at night.

Just as important as making, and knowing what your financial goals are, every investor will need to honestly assess their risk tolerance and relationship with money. Not being aware of you risk tolerance, will mean that you are always making investment decisions that leave you anxious or unsatisfied, even when they are financially sound investments.
Many people are quite comfortable with the notion of investing their long term money in relatively high risk, and ergo volatile investment funds. They will not check the markets daily, and have both the psychological stamina and patience to ride out any short term fluctuations in the market without panic selling. This confidence that their investments will do just fine in the end, is the hallmark of most high risk investment strategies.
Many investors though, are either unwilling or unable to deal with all this market uncertainty. Such investors have a need to predictably know, where their investments will be from year to year, or indeed from month to month. Constant fluctuations in the market valuations makes them very uncomfortable. Uncomfortable investors are often unhealthy investors. You are unlikely to be leading a productive life, if you spend every waking moment worrying about your investments, or worse yet, are unable to sleep because you are worried about their performance.
Most investors though, lie somewhere between these two extremes. Knowing just how much risk, and financial uncertainty you are prepared to comfortably live with will be paramount to your investment success. Can you sleep soundly when the market is extremely volatile? Are you able to endure long periods of market stagnation? Are you able to keep sinking money into a falling market, with the expectation of a long term rebound in stock valuations and returns?
There is no point in taking a high risk investment strategy if it means you close out your positions and make a loss at the first signs of market jitters. A good investment strategy poorly executed is almost invariably worse than not having the right strategy to begin with. The markets can be extremely volatile too. Daily movements of several percent are not uncommon in some markets. Penny stocks are often liable to have significantly high daily volatility.
Discussing money and investments in the abstract rarely leads to the right conclusions though. If you are uncertain exactly where your risk tolerance lies, a good idea is to begin by investing the bulk of your money in low risk investments. The rest can then be invested in the more risky, high growth funds. You can then steadily increase (or reduce) the proportion of your money you put in such funds, until you reach your risk-profile comfort level.
Making such a decision based on real money invested, will give you a far truer picture of your investment personality, than you could ever achieve from talking to all the investment advisers on the planet. Knowing your true risk profile will also allow you to develop an overall investment plan that is most profitable for you, whilst allowing you to sleep soundly at night.

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