All investment decisions involve varying degrees of risk and making an investment in securities is no different.
Every investor will have a different amount of risk he/she is prepared to take on each investment decision. This 'degree of risk' investors are prepared to take is commonly referred to as risk tolerance.
Just three examples of the many factors that can influence this risk tolerance are:
- The amount of money an investor has available to invest
- The period of time that money can be invested
The investors level of investment experience
It is important for investors to establish an understanding of their risk tolerance to help them make sound investment decisions.
Also important in the decision making process is for investors to assess risk in the securities of the particular company they are looking to buy. Here too there are a number of factors worth considering. Strike action by workers in the industry, new legislation or proposed governmental regulation are just a few examples of things that could affect the price and performance of a security over time.
So understanding risk tolerance and specific risk are both important factors in understanding how risky an investment in securities might be.
There are a thankfully a plethora of online resources that can help you evaluate these things and while EasyEquities will not provide any investment advice, nor advise participants about the suitability of any transaction, it will make a raft of educational tools available to investors.