Ignoring Risk Aversion
Do not lose sight of your risk tolerance or your capacity to take on risk. Some investors can't stomach volatility and the ups and downs associated with the stock market or more speculative trades. Other investors may need secure, regular interest income. These low-risk tolerance investors would be better off investing in the blue-chip stocks of established firms and should stay away from more volatile growth and startup companies shares.
Remember that any investment return comes with a risk. The lowest risk investment available is U.S. Treasury bonds, bills, and notes. From there, various types of investments move up in the risk ladder, and will also offer larger returns to compensate for the higher risk undertaken. If an investment offers very attractive returns, also look at its risk profile and see how much money you could lose if things go wrong. Never invest more than you can afford to lose.
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