Risk Tolerance

By | August 24, 2013

As with all investments there is a risk factor at play, it will depend on what the risk that you are willing to take as to what products you will go for. It will also depend if you can afford to lose the capital that you need to invest, if the answer is no then you will need to look for the more low risk options. If you still have some capital left then choosing some high risk investments mixed in with the low risk options will mean that you have the potential to earn some higher rates of return whilst still keeping some capital safe.

High risk

Those items that are at the high risk end of the investment scale and are considered more of a risk with your capital. If you can’t afford to lose the capital then this option might not be for you. The advantage of a high risk in investment normally means that you get better turn around for your investment, your money works harder for you. This is alright if the money that you potentially might lose is needed for something then you might not be in a position to invest the only capital that you have into a high risk investment.

Low risk

A low risk investment means that you are less likely to lose the money that you invested, and that you will get some money in return for your investment. The investment is pretty much guaranteed and because of this the money that you will earn for that investment is quite limited, it will not compare to the high risk options. A lower risk option is a great way to balance the options that you have available, it can be a way that will mean to keep capital safe and that way you might be able to offset this with some high risk options to give the chance to grow the capital.

Medium risk

With an investment that has a medium risk it does mean that there is the potential to walk away with less money than you originally invested, you could lose the capital investment. This is worked out for you if you opt for a financial company to find the investments that you want to work for. But it will mean that your money is going to be growing quicker than if you were investing in low risk options.

Therefore, it is possible to look at the different options available and to work out the best selection for your individual needs. This will depend on the capital that you have available and the length of term that you have available to leave it to mature. If you need the capital in five years then investing it long term in a high risk option might not be the best option for you. But if you are not looking for the capital to use and you have twenty years that you are considering the investment period, then a longer term high risk option might be just what you are looking for. Learn to grow your money.

 

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