Investment Risk Tolerance

An important part of investing is understanding your risk tolerance. Risk tolerance is an investor's ability to handle declines in the value of his/her portfolio. An investor's risk tolerance varies according to age, income requirements, financial goals, etc.

There is possibilities that investors might lose some money during investment.

If you can afford to lose more money, you can take bigger risks and aggressive stocks and funds, and in the currency market. However, if you cannot afford to lose a great deal of money, it is vital that you do not invest as much of it, and that you stick to more conservative stocks and funds. You may not make as impressive returns, but you will at least be less likely to run into a situation where you are financially ruined by your losses.

In order to understand your own risk tolerance, you should:

1. Look at how much money you have, and how much money you can afford to lose.

2. Can you stand to lose the money? Will you be constantly stressed about the performance of your investment?

3. Starting with a more conservative investment as they get used to the idea, and then moving to riskier investments as they earn money and become more comfortable with the investment process.