Determine Your Risk Tolerance
Risk tolerance differs for every person. Your stock analyst and broker know this quite well and they will help you assess your risk tolerance, making sure that your investments do not surpass your risk tolerance.
Risk tolerance is determined by considering various factors, like how much money can you afford or allocate to invest, and what your long-term financial objectives are.
Let's take an example. Consider that you aim to retire in the next ten years and have no savings yet. In such a case, you have to have a large risk tolerance so that you can fulfill your aim of retiring.
In case you are twenty as of now and plan to start investing for your retirement, then you can do with a lower risk tolerance.
One simple thing has to be noted that how you feel or how much risk you feel in the investment is in no way related to your risk tolerance related to your long-term financial objectives.
For instance, if you invested in the stock market and you watched the movement of that stock daily and saw that it was dropping slightly, what would you do?
Now, having invested in stocks, if you observe that the stock prices are dropping a bit, what can you do?
You might sell out if you have a low risk tolerance or let your money ride and wait patiently for things to improve. This risk tolerance, though, is based on how you feel about your money and not on your financial objectives.
Any good stock analyst or an expert stock broker can easily help you figure out your investment risk tolerance, and they will guide you on investing correctly, as per your case.
To put it shortly, your risk tolerance has to relate with your long-term financial objectives and also with how you feel about investing your hard earned money.
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We’re going to break down stock trading training for beginners so it doesn’t seem scary. One of the first things you need to do when you start out is to pick a good broker. A stock broker is going to be where you do all your business. Picking one that has large commissions and fees can be detrimental to a beginner.
ReplyDeleteAn important second step is going to be learning how to read a stock chart. The stock chart holds all of the clues to which direction the stock is going to move. Watch our ThinkOrSwim video on charts setup.
Another great resource for learning to read a chart is stockcharts.com. They have a chart school for any questions that you might have. Charts can look like Greek when you’re starting out. The more you look at a chart, the more you’ll understand it and be able to predict trends.