George Divel Investment Tips

Tip # 3  How much risk can you tolerate?

Are you a risk taker or are you risk averse? Do you have a clear idea of what risk is or do you confuse risk with volatility?  These are important questions that you should discuss with your investment advisor.

Big investment firms and banks have skilled professionals who are employed full time as risk managers. Their job is to estimate the amount of risk in every investment to increase the odds that the investments will be profitable.

But for most individual investors, risk has to do with you gut.  The biggest investment rewards go to those investors who are willing to risk their money.  Do you have the stomach to lose your hard earned cash in exchange for the possibility of high returns? Or would you rather invest more conservatively and earn returns that are less but steadier?

It is very important to be honest about how much risk you can comfortably manage and then to invest accordingly.

Also, even if you are a risk taker, you must also consider your investment time horizon to make sure your goals are realistic. This is another conversation you need to have with your investment advisor before you start any financial planning.