Attitude to risk

One of the important aspects of financial planning is understanding your risk tolerance. For example if traditionally you have a conservative attitude towards risk then you may want to steer clear of those investments where there might be a huge return. What you ask isn't that good? A 50% return might sound pretty mouth watering but remember that if it goes up 50% it can also mean that it may go down 50% as well. You conservative types still interested? I bet not a lot of sleep would be had by people like that if that is what they are invested in. On the other side of the equation the ultra-aggressive investors may grow a little tired of single figure returns. They want to be in something a bit more interesting, a bit more exciting.

So, what do you have to do? First of all, clarify what you are saving/investing for. What is your time horizon? When do you want the money? If you want the money in a year, then maybe the local bank is the best place for it. What if you want the money is 30 years? Then you could start a regular savings plan. At the start of the plan because of your time horizon you can take some risk. maybe invest in equities and hedge funds. In the middle stages you would then become a bit more strategic with your investing and then towards the end of the plan because you have built up a large amount of money you would become more conservative as you head towards maturity of the plan.

So, what are you? Are you conservative? Are you aggressive or are you in between?