Wealth Building Program - Risk Tolerance
Every person has a unique financial risk tolerance. This risk tolerance is critical to any good wealth building program. All good wealth advisors and financial planners know how important risk tolerance is and should work with you to find suitable investments for your situation. But it is up to you to ensure that you determine your risk tolerance before embarking on any wealth building program. The way to determining your risk tolerance is to take it in steps. First, you need to know what your wealth goals are. Next you need to know exactly how much you have to invest. Finally you need to know what you can personally tolerate in regards to your feelings about risk. For example, if you plan to retire in 5 years, and you’ve not saved a single penny for that goal, you need to have a high financial risk tolerance – because you will need to do some aggressive – risky – investing in order to reach your financial goal. But your personal risk feelings also need to be considered. On the flip side, if you are in your early twenties and you want to start investing for your retirement, your risk tolerance will be low. You can afford to watch your money grow slowly because you have plenty of time to do it. It is important to note that your risk tolerance is not the same as your feelings about risk. Risk tolerance should be approached from a factual perspective. Feelings about risk should also be taken into consideration by your wealth building program. A good wealth building program will allow you to take an “emotional” backseat. By mapping out your goals and sticking with your plan, you are less likely to allow your personal fears and feelings sabotage your ability to stick it out. Without a plan, you may find yourself nervously watching the stock market daily even though your financial risk tolerance is high.
Your risk tolerance should be based on what your financial goals are and how you feel about the possibility of losing your money. It’s all tied in together. To get a free Wealth Building Goals Worksheet visit Wealth Building Program.