Some people like taking a slow drive while others prefer to zip by on a high powered machine. Whatever you prefer is based on your personality and needs.
Similarly, your investments should match your personality and needs. In investing, your risk tolerance helps determine whether you’d be better off with steady-moving investments or investments that give you a more intense ride.
Bonds are generally less risky than stocks. That being said, bonds are definitely not immune to suffering losses. This depends on the credit worthiness of the bond issuer.
Once you understand how much risk to take on, you can put together a diversified portfolio that consists of each investment. For many investors, it makes sense to hold a mix of stocks and bonds, but this mix would vary depending on whether they are looking for something conservative or aggressive.
Conservative portfolios would consist of a larger allocation to bonds and cash while aggressive portfolios would consist of a larger allocation to stocks.
Don’t invest without first understanding your risk tolerance. Once you do this, choose a selection of investments that would match your risk tolerance.
Crea8 makes it easy and seamless to do this with our Goal based investing service. We help you determine your risk tolerance and then tailor an investment portfolio for you based on this.
If you are new to investing and are not sure how to start, check out our article titled ‘8 steps to successful investing’ for a few pointers.
For further insight into our investment methodology including our Goal based investing methodology and how risks can be tamed and harnessed to create optimal risk-reward investments., check out our white papers.