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Tips on Determining Where to Invest and Your Risk Tolerance

Apr 2, 2008
There are several different types of investments, and there are many factors in determining where you should invest your funds.

Learning about the stock market and investments takes a lot of time but it is time well spent. There are numerous books and websites on the topic, and you can even take college level courses on the topic - which is what stock brokers do. With access to the Internet, you can actually play the stock market - with fake money - to get a feel for how it works.

You should speak with a financial planner. Tell them your goals, and ask them for their suggestions - this is what they do! A good financial planner can easily help you determine where to invest your funds, and help you set up a plan to reach all of your financial goals. Many will even teach you about investing along the way - make sure you pay attention to what they are telling you!

Determine your risk tolerance

If you plan to retire in ten years, and you've not saved a single penny towards that end, you need to have a high risk tolerance - because you will need to do some aggressive - risky - investing in order to reach your financial goal.

Realize of course, that your need for a high risk tolerance or your need for a low risk tolerance really has no bearing on how you feel about risk. Again, there is a lot in determining your tolerance.

Your risk tolerance should be based on what your financial goals are and how you feel about the possibility of losing your money. It's all tied in together.

While not investing at all or putting off investing until later are big mistakes, investing before you are in the financial position to do so is another big mistake. Get your current financial situation in order first, and then start investing. Get your credit cleaned up, pay off high interest loans and credit cards, and put at least three months of living expenses in savings. Once this is done, you are ready to start letting your money work for you.

Never invest money without having a goal and a strategy for reaching that goal! This is essential. Nobody hands their money over to anyone without knowing what that money is being used for and when they will get it back! If you don't have a goal, a plan, or a strategy, that is essentially what you are doing! Always start with a goal and a strategy for reaching that goal!
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