Introduction

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We all have heard the saying of risking what won't kill you. Well, saying that without no knowledge about investment will make you settle for mediocrity. Knowledge helps you increase your risk level depending on the nature of investment. Also, lack of knowledge can make you go back to nothing.

Knowledge is needed to push you with a safety boot.

What is Risk Tolerance

It simply means the amount of loss that can be managed by an individual without going bankrupt. To know your risk tolerance is like knowing the parts of your body. It is as necessary as knowing the streams of your income.

Well, are you already an investor and yet don't know your risk tolerance? Guess what, we are in this together but the good news is, we will know now. If you are identified in one of the following I will be briefing below and want to change to another, get detailed knowledge before migrating.

Types of Risk Tolerance

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which are you?

There are several types of risk tolerance but the popular types are:

1. Aggressive Investor:
Micheal earned $100 every month from his poultry business. One beautiful morning, Micheal decides to invest in companies stocks. Several listed stocks where available in the market for him to buy. Micheal as an aggressive investor chose stocks that is predicted with higher risk but more streams of returns. He decided to allocate $20 to financial advising and invested $40 to stocks at a long period of two years, after those years, if successfully predicted, he gains higher depending on the rate of returns(which is always high).
High risk=high returns

🔹Longer horizon
🔹Higher risk
🔹Higher returns

Advice:

Get Financial Advisor or Education for this category to lessen your losses based on the choices of the nature of your investments.

2. Moderate Investor:
Joanna is really worried about how expenses are out beating her income. Finally, she sets her mind to invest but she does not want to be too risky and too conservative. However, she still wants cool returns, if possible very high (everyone wants higher returns but not everyone can take the risk)Not minding, she still wants to be moderate with what she sets out for investment minding that she had already had laid down expenses to pay for. Joanna therefore looks for moderate risk investment which could be in form of shares, businesses, etc.

Features include:

🔹Moderate period of time(optional)
🔹Moderate Risk Tolerance (if possible, diversification of both low risk and high risk investment)
🔹Relatively high or low returns

3. Conservative Investor:
Mr. Morinho has been a man that plays in safety nets. He is always happy about how safe his investments are. The last time he tried to aggressively invest with no adequate knowledge and emotional balance, he almost became crazy but luckily for him, he did not go mad : ) . He couldn't handle the high risk but also desires the high returns, however, he wants to still be emotionally balance at his level, so he invest low and receives low returns. He is ever willingly to accept low returns just to keep his capital secured.

Features Include:

🔹Low risk = Low returns
🔹Short or long period of time but doesn't stop it's low returns with respect to the capital in question.

In conclusion, we all need to know where we belong so that we can acquire detailed knowledge before making the choices of investment suitable for us. But knowing your risk tolerance doesn't stop the number of investment you should take, risk tolerance is just based on management. Many people investment is sometimes based on several factors like current mood, ugly experiences, great market as well as a bad one. These several different experiences as pushed people to and fro in several categories.

Thanks for the read, Hive on!