Risk is the probability of a loss from an activity. It is involved in your everyday life and also in your finances.
It is good to understand your risk threshold as it would help with your investment decisions.
To start off, it is good to ask yourself these questions to understand yourself better:
These are just a few questions of a lot more and it is good to understand your financial standing before investing.
It is good to understand your risk threshold as it would help with your investment decisions.
To start off, it is good to ask yourself these questions to understand yourself better:
- What is your age - the closer to retirement, it is better to have a good savings
- What is your current employment situation - without work you need to have a savings that gives you enough returns to survive
- What is your net worth - with $10,000 it would be good to keep them in cash for it is liquid as compared to $1,000,000 where some should be invested to give you a better return
- How much are you invested in equities - with a lot in equities, once again it is about liquidity and having some spare cash enough for a rainy day
- How would you feel if your investments lose half its value today - some people have a higher risk threshold than others, where they can survive on only $5,000 in the bank while having $200,000 in equities. This person perhaps does not have a lot of other commitments such as a home mortgage and so on.
These are just a few questions of a lot more and it is good to understand your financial standing before investing.
