An important step in understanding who you are as an investor is knowing how much risk you are willing to take. Every investment has some amount of risk. The higher the potential return, the higher the risk. There is no such thing as a high return, risk-free investment, so if you want higher returns you have to be prepared to take on the risks that go along with them.
Understanding Your Risk Tolerance
The amount of risk you are willing to take may depend on:
- if you would rather keep your money safe or seek higher growth
- when you need your money
- how you react to the ups and downs of the markets
- if you have any debts
- if you have other sources of income to fall back on
Working with an Adviser (PDF) – How to choose a financial adviser and make the most of the relationship.