Know Your Risk 

Because of the myriad of investment options, instruments and information, understanding yourself, knowing your risk tolerance creates a starting point to many of your investment decisions.

What is risk profile? – Your risk profile is a measure of one portion of determining investment suitability. Do you feel comfortable with small company investments in Emerging Markets? Do you prefer large firms based in the U.S.? Do you like money in gold or CD’s at the bank? How do you feel about stock market fluctuations and volatility? Do you feel comfortable with the level of risk that you may need to take to meet your goals? Risk profile analysis helps identify your comfort level in investing.

Other considerations- Other investing considerations that are helpful to get the broader picture of what makes sense for you in your investing are these: your values, time until you need this investment. What other financial issues and family concerns are you facing? How well do you understand certain instruments. Goals, dreams and other pieces all help determining suitable investment options for you.

Can your risk change? – I have found that risk profiles can change. And you may have different risk profiles as you have different investments. The money saved for the kids college education, the money for a distant retirement, the money you are saving for a second home may cause you to invest differently and may reflect a varied risk tolerance for each.

I have seen risk profiles change for other reasons. Clients who had less understanding develop more knowledge and sometimes then wish to be a bit more aggressive in their investing choices. Other times life’s setbacks or difficulties may leave you feeling more conservative in your allocation.

It’s important to have as good an understanding of what’s important to you in many aspects to best determine what investments will work best for you. Don’t overlook your risk.

How to determine-

Marion Syversen, MBA
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