Risk Tolerance

An investment risk in general is the act in which an individual wanting to invest is willing to try different methods of “financial satisfaction.” In other words that individual is somewhat an aggressive investor, willing to try different methods, other than just savings, CD’s, and other safe investments. An investment risk is the ability to accept that you will have a loss in part of your investment, while knowing you may or many not gain it back. There are three kinds of investors, the first is an aggressive, next is moderate, and lastly a conservative. The following paragraphs, describes the previous kinds of investors.

Aggressive :

An aggressive investor is the most competitive and most willing risk taker in the investment arena. These kinds of investors have a portfolio that has around 20% of their investment in cash and 45% in income and 40% in growth. The reason that so little would be in cash investment is because they are probably younger investors and would be willing to risk more, since they have maybe a longer time if they “lose” to gain back afterwards. Then slowly, these aggressive ones will slowly lean towards the moderate and conservative road.

The Kinds of investments these aggressors would put their money in would be, Stocks and bonds, Mutual Fund bonds, T-bills/notes, Real Estate (rental units, land and commercial property), Mortgage Securities, Blue chips, small/mid/large caps, and Balanced Funds. These investments involve great gains with greater risks.

Moderate:

A moderate investor is probably also young but also could be just getting out of the “aggressive” arena of investing. These investors are more likely to have a portfolio that has about an equal amount of money distributed, like 35% in cash, 35% in income, and 30% in growth. These kinds of investors don’t want to take too much risk in something that they are not going to get gain. So these investors in a nutshell, stay in safe waters by having an equal...