Question.2546 - Describe your current investment risk tolerance and what your tolerance is based on (e.g., age, objectives, needs, etc.). In response to your peers, explain if you agree or disagree with your classmates’ assessment of risk tolerance based on the factors listed and explain why.
Answer Below:
I would describe my risk tolerance capacity to be high. Risk tolerance is something which cannot be defined in words. A person of a younger age usually has a higher risk capacity. I am 23 years old, I personally do not like to invest in fixed income schemes. I would like diversify my portfolio by investing in different types of stocks and bonds. My objective is to be financially secured in my old age for which I need to plan my retirement well. There is a long time horizon involved till the time I retire. If I have become risk averse in my young age, it will not generate higher returns in the future years to come. When a person starts ageing, his risk tolerance capacity starts decreasing. I plan to have an amount of approximately $10 million by the time I retire. I need to have proper investment structure in order to have sufficient amount of money for retirement. In order to have a diversified portfolio, we also need to have a prior knowledge about the stock market and various other investment plans. When a person grows old, it does not mean that he or she should automatically switch over to conservative investment plan. It should always be a gradual process from being risk aggressive to being risk averse. Therefore, we can conclude that an individual risk capacity tolerance is based on various criteria’s like age, needs objectives etc("Risk Tolerance", 2021). Every individual have different objectives in life and they should accordingly have an investment plan depending on their objectives. If a person is not capable of taking risk, he or she should follow a conservative approach but on the other a risk aggressive person will always be willing to take risks than following a conservative approach References Risk Tolerance. Corporate Finance Institute. (2021). Retrieved 21 September 2021, from https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/risk- tolerance/.More Articles From Finance
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