Even conservative investments may lose earning power if their growth does not outpace inflation. On the other hand, the winner take-all attitude of very aggressive investors holds the potential for great loss as well as great gain. To help determine where your tolerance for risk lies, review the statements below.
Conservative or Low-Risk Investor:
- I don’t want to risk any of my principal.
- I want a guaranteed rate of interest on my investment.
- I am near retirement.
Moderate or Medium-Risk Investor:
- I can live with some ups and downs.
- I would like a combination of higher and lower risk investments.
- I have some time for my money to grow.
Aggressive or High-Risk Investor:
- I have an iron stomach and can handle market swings.
- I want the highest possible long-term rate of return, even if I risk losing principal.
- I have at least 10–15 years for my investments to grow.
Whatever your investment philosophy, you should never put money in an investment you don’t understand. And, remember to reconsider your investment portfolio periodically. Review it when you experience changes in your life, such as when you get married, divorced, or have a child. It is especially important to examine your investments as you approach retirement age.
