RiskMetrics - Risk Profile


Risk Profile

Investors have different tolerances.

People will always have different preferences for risk taking. Some claim that we are born with a certain risk tolerance level, but then our appetite for risk tends to diminish as we grow older. It makes sense for a young person to take more risk. Chances are you'll need to keep your day job, but it doesn't hurt to entertain the possibility of making out big and sailing into the sunset early. Conversely, an 71-year-old has little incentive to risk the retirement nest egg.

Risk Profile

So what's the right amount of risk to take? First, consider your risk preference. After all, what good is a profitable investment if it costs a heart attack along the way. Some are inherently comfortable with risks that make another's stomach churn. How would you feel if your portfolio lost a titanic 21 % in a single day (that's how much the S&P 500 fell on Black Monday in October 1987).

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