RISK TOLERANCE is the degree of variability in investment returns that an investor is willing to withstand. You should have a realistic understanding of your ability and willingness to stomach large swings in the value of your investments; if you take on too much risk, you might panic and sell at the wrong time.
An aggressive investor, or one with a high risk tolerance, is willing to risk losing money to get potentially better results. A conservative investor, or one with a low risk tolerance, favors investments that maintain his or her original investment.
Virtually every investment has some type of risk associated with it. The stock market rises and falls. An increase in interest rates can cause a decline in the bond market. No matter what you decide to invest in, risk is something you must consider.
One key to successful investing is managing risk while maintaining the potential for adequate returns on your investments. One of the most effective ways to help manage your investment risk is to diversify. Diversification is an investment strategy aimed at managing risk by spreading your money across a variety of investments such as stocks, bonds, real estate, and cash alternatives; but diversification does not guarantee a profit or protect against loss.
Your Risk Tolerance will be different at different ages and stages in your lifetime. Are you single or married? Starting out, paying off college loans, looking to the future? Are you settled in with a family and a house? Are you an unencumbered professional? Maybe you are staring down retirement, relaxing into a comfy lifestyle of your choosing. A good financial planner can guide you through all the different scenarios you may encounter.
So, how do you find that person you can trust with your future? You schedule an interview; visit the office, meet the staff. Are you comfortable? Are you being heard? Are you being asked the right questions about your future plans, goals and dreams? At Chestnut Investment Advisory, we hear you, we get to know you, we are here for you! Schedule an appointment for a path to a brighter future.