Goals evolve
One last thing: goals evolve. Life throws curveballsjob changes, kids, unexpected expensesso revisit your list yearly. A portfolio that worked at 30 might not fit at 50. That’s okay. The point is to start with intention. If you’re a beginner, don’t let indecision stop youpick one goal and build from there. Seasoned investors, use this step to sharpen your focus. Maybe you’ve been chasing returns without a clear “why.” Now’s the time to realign.
Ready to act? Take out a piece of paper and pen or open any note-taking application in your phone. List down one specific financial goal that you would like your portfolio to achieve. Place the dollar amount and time frame. Congratulations! You have just laid the foundation of the stone on which your success shall be built from the day you built it. In the next section we are going to occupy ourselves in establishing how much of a risk taker one is in order to get there. It is for this reason that goals are but only half of the story; the other half, however, pertains to self-awareness.
How to Determine Your Risk Tolerance for Smart Investing
After ensuring that you have determined your financial goals, then the next question that you will be in a position to answer is that of risk tolerance. Every time that investment is mentioned, one has to define it as an investment which is not only about buying the right shares, bonds, mutual funds or any other financial securities that an investor may fancy, but the right securities for the investor in question. Thus there is this phenomenon which is termed as risk tolerance. It is the same as knowing how fast one can comfortably drive in the winding road one has to take, if one drives slowly, the one will not get there and if one drives fast, the one will definitely have a car accident. Let’s figure out your speed.
Risk tolerance in the context of investment means the measure of risk or amount of loss the investor or traders are capable of bearing in an investment transaction. It varies to a great extent and depends on many factors such as age, income, total assets, liabilities and inclinations. This is something that may not be of particular concern to a 25-year-old single employee working in a technology firm and has neither marriage nor dependent children as compared to a 55-year-old father of college going children. Neither is wrongit’s just different. As a result, it becomes easy to establish your risk tolerance level so that you invest with a view of creating value as opposed to straining.