Investing
involves taking a certain amount of risk,
and it also involves the desire to compound your money over time. Done properly, investing is a carefully planned and prepared approach to managing your money, with the goal of accumulating the funds you need. And planning your
investment strategy is about discipline
and patience. When it comes to investing, there's a direct relationship between risk and return. That is, in general, as the
potential for return increases, so does the level of risk of loss. The investment
plan that's right for you depends largely upon your level of comfort with
risk--what's known as your risk tolerance. You can't completely avoid
risk when it comes to investing, but it's possible to manage it. Risk tolerance: two key
questions First, how comfortable are you personally with risk? This is a subjective measure, and it depends on many factors, including your financial goals, life stage, personality, and
investment experience. The second key question is: how well is your investment plan set up to handle potential losses? The more resilient your overall plan is when faced with any potential losses, the more risk it might be able to take on. For example, time can be a powerful ally. The longer you're going to be invested, the more flexibility your investment plan might have to survive setbacks along the way.
involves taking a certain amount of risk,
and it also involves the desire to compound your money over time. Done properly, investing is a carefully planned and prepared approach to managing your money, with the goal of accumulating the funds you need. And planning your
investment strategy is about discipline
and patience. When it comes to investing, there's a direct relationship between risk and return. That is, in general, as the
potential for return increases, so does the level of risk of loss. The investment
plan that's right for you depends largely upon your level of comfort with
risk--what's known as your risk tolerance. You can't completely avoid
risk when it comes to investing, but it's possible to manage it. Risk tolerance: two key
questions First, how comfortable are you personally with risk? This is a subjective measure, and it depends on many factors, including your financial goals, life stage, personality, and
investment experience. The second key question is: how well is your investment plan set up to handle potential losses? The more resilient your overall plan is when faced with any potential losses, the more risk it might be able to take on. For example, time can be a powerful ally. The longer you're going to be invested, the more flexibility your investment plan might have to survive setbacks along the way.
Growth, income, stability
When it comes to investing, "growth" means that an investment has the potential to grow in value; if that happens, you might be able to sell it for more than you paid for it (of course, if
an investment loses value, you could lose principal). Income comes from regular payments
of money. Interest on a savings account is income. So is interest on a certificate of deposit, interest paid by a bond, and stock dividends. Stability, the third potential objective of an investment, refers to protecting your principal. An investment that focuses on stability concentrates less on increasing the value of that investment, and more on trying to ensure that it doesn't lose value. As much as we might like to, we can't have it all. There is a relationship between growth, income, and the stability of our investments. The more important one of those areas becomes, the more you may have to trade off in terms of the other two. The key is to tailor your investments according to what you want them to do for you, and to balance stability, income, and growth so that you maximize your overall returns at a level of risk that you're comfortable with.
Source : Kramer Financial
When it comes to investing, "growth" means that an investment has the potential to grow in value; if that happens, you might be able to sell it for more than you paid for it (of course, if
an investment loses value, you could lose principal). Income comes from regular payments
of money. Interest on a savings account is income. So is interest on a certificate of deposit, interest paid by a bond, and stock dividends. Stability, the third potential objective of an investment, refers to protecting your principal. An investment that focuses on stability concentrates less on increasing the value of that investment, and more on trying to ensure that it doesn't lose value. As much as we might like to, we can't have it all. There is a relationship between growth, income, and the stability of our investments. The more important one of those areas becomes, the more you may have to trade off in terms of the other two. The key is to tailor your investments according to what you want them to do for you, and to balance stability, income, and growth so that you maximize your overall returns at a level of risk that you're comfortable with.
Source : Kramer Financial
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