5 Considerations to Help Determine Your Risk Tolerance

Investing money is one strategy that you may implement as part of your financial portfolio. When investing, though, there are various considerations, including how aggressive of an investment strategy you want to take. The more aggressive the strategy, the greater the chances of higher returns and the greater the risk of loss; the more conservative strategy, the lower the chances of extreme loss and gain. As you think about your risk tolerance, here are five things to consider—

How Much Time Do You Have?

How much time you have before you need the money can impact your risk tolerance. Generally, the more time you have before retirement (or whatever else you need the money for), the more risk you can take on. This is because if you suffer a major loss, you’ll have time to regain. If you have a shorter time horizon and less time to recover from a potential downturn, you may want to employ a more conservative strategy. 

Can You Stomach Short-Term Losses?

Watching your money decline in value can be scary, especially if you need the money in the near future. If you have a hard time stomaching short-term losses and need the money sooner rather than later, taking a more conservative approach will mean less jarring losses. Keeping in mind this also means smaller gains in the event that investments increase. 

What Are Your Investment Goals?

Your investment goals are a driving factor behind the investment strategy you employ. Are you investing for retirement, a down payment for a home, to pay for education expenses for your children, or for another reason? By understanding why you need the money and by when you need it, you’ll have a better understanding of what your approach to investing should be. 

What Other Savings Do You Have?

It’s important to consider your overall financial picture and determine whether you have other savings available in cash, not just investments. If you don’t have other cash available, this could be problematic in the event that there is a market downturn and all of your investments are in aggressive portfolios. 

How Involved Will You Be in Overseeing Your Investments?

How involved you plan to be in your investments and whether or not you can stomach everyday fluctuations in the market may impact the approach you take. Generally, someone who is actively looking for investments and buying opportunities will take a more aggressive approach. 

Get Support from an Investment Planning Professional Today

When you work with our investment professionals at Harvest Wealth Partners we can create a personalized investment strategy for you based on your needs, goals, and risk tolerance. Call us today to learn more.

This material was prepared for Harvest Wealth Partners financial advisor’s use.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.