Whether you’re new to investing or have had a lifetime of stock market experience, there’s one thing that can derail a financial plan: the fear of losing money. History is littered with stories of people who have created plans, only to tear them up after a recession or some unexpected drop in the market.
Investing isn’t just about picking securities that will make money. It’s about choosing investments that line up with your risk tolerance.
Investing isn’t just about picking securities that will make you money. It’s also about choosing investments that line up with your risk tolerance. If you’re a conservative investor but hold 80 percent of your money in equities, then there’s no question you’ll panic when the market falls. If you’re a more adventurous investor but hold most of your money in bonds, then you’ll wonder why you haven’t made the returns you were expecting.
Determining your risk tolerance can be difficult, since you often can’t gauge it until the market corrects. When you do get it right, though, investing will be that much easier. You may still feel a little pain when the market falls, but you’ll be far more comfortable and confident that your portfolio will bounce back.
We spoke to Andrew Beer, Manager of Strategic Investment Planning at Investors Group, about how people can figure out how much investment risk they should take on.