One of the most significant risks investors face isn’t losing money in a market dip; it’s failing to reach their long-term financial goals.
Many people focus heavily on short-term losses in the stock market and try to protect their savings by investing conservatively or avoiding stocks altogether. But that runs the risk that their savings won’t grow enough to keep up with inflation or support future needs.
Understanding what investment risk really means helps you make smarter financial decisions, considering these three key aspects.
- Risk tolerance describes your emotional comfort with risk. If you’d want to pull your money out of the market during a downturn, that reveals something about your tolerance. Many financial advisors use questionnaires to help clients understand how they might react in different market conditions.
- Risk capacity refers to…
