What Is Your Tolerance for Risk in Investing? Is it the same as for other members of your class? Why or why not? Why do you think some people are riskier with their investments than others
Risk tolerance for investing can be defined as an investor's individual threshold for withstanding variability in investments. An investor needs to understand his/her own risk appetite.
Looking at my own portfolio, I would say that my investment risk tolerance is higher than many people of my age group. I have investments across the spectrum and have invested in appreciating (hopefully) assets. It is because I am planning a much longer time horizon than many of my peers do, as I plan on working for more number of years. Also, I am looking for higher returns, which are generally possible with more investment. I have peers who have lower risk appetite because of lesser capital availability, unclear future goals and shorter time horizon.
Some people take more investment risks than others, because they may have more stable sources of income (such as house, bonds or inheritance). They may also be working towards a longer time horizon, and maybe expecting pay rise. Then there are people who just have higher risk appetite and are working towards bigger goals (i.e., a higher rate of return).
Hope this helps.