What investments match your risk tolerance? Whether you are looking for a short-term or long-term strategy to maximize your return, you must evaluate your personal risk attitude and decide on an investment strategy that matches your needs. Your age, job, and family situation all play a part in determining your risk tolerance, as well as your overall investing style. If you are young and inexperienced, your risk tolerance may be low and you should choose an investment strategy that fits your age and goals.
As you approach retirement, your risk tolerance may change. As you near retirement, you may be more conservative and want to invest in lower-risk investments. You will also have less time to recover from market downturns. A lower risk tolerance may help you avoid a panic-inducing 20% loss. If you are unsure of your risk tolerance, you should talk to a financial advisor or brokerage firm to learn about different investments that fit within your risk appetite.
Knowing your risk tolerance will help you plan your investment strategy and invest with greater confidence. It will help you decide whether to invest alone or seek the help of a professional. To take the quiz, you will need to answer the questions below. Choose the responses that best describe you. Remember to have fun answering the questions. When you have finished, click the NEXT button to see the results. If your answer matches your expectations, you can then decide whether you want to invest in stocks, bonds, or real estate.
Investing at the right risk level is crucial for long-term success. Risk tolerance is a combination of a person’s willingness and ability to bear risk. A higher risk investment portfolio may be fine for some investors, but it could be detrimental for others. 100% stocks are too volatile for others. Investing in the right investments for your risk tolerance can lead to significant wealth. Once you understand your risk tolerance, you’ll be better equipped to select investments that match your personality, goals, and risk appetite.
Your investment objective may also play a part in determining what investments match your risk tolerance. Are you looking to build a nest egg? Alternatively, you may want to live off the income generated by your nest egg. Time horizon is a crucial piece of this equation, and the shorter the timeframe, the lower the risk tolerance you’ll need. For example, if you have a long-term goal, your risk tolerance will be higher.
Before investing, consider your investment time frame. Depending on your risk tolerance, stocks offer the best potential return, but they also carry the highest risk. If you have a long-term goal and plan to retire within the next few years, an all-stock portfolio may be sufficient. If you’re young and conservative, a more conservative attitude may be more appropriate. The Navy Federal Investment Services website will help you determine your risk tolerance and help you choose the right investment portfolio.