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What is Risk Tolerance and How Can I Figure Out What Mine Is?

24 April 2018

Your risk tolerance is the amount of variability in investment returns that you would be willing to ‘tolerate’ or withstand. Do you have a realistic understanding of your own risk tolerance?


Everyone’s is different and choosing how and when to invest is not a scientific process. Instead it is very personal and takes common sense.


To begin can you answer some questions about yourself?

Factual:

  • How old are you?
  • Is your only source of money?
  • How soon do you expect to need it?

  • Emotional:

  • Do you easily panic when the market falls?
  • Do you want to sell then?
  • Do you have the courage to buy when the market is losing money?

  • Your answers will give you your personal risk tolerance. If you are young and/or have a steady, well-paying job and can ignore the short-term bumps to look at the long-term view, you can probably take a more risk. But if you are relying on your investments as your only source of income, then taking less risk makes more sense.

    Everyone’s circumstance is different, therefore risk tolerance varies.


    Solaris Advisors can help you to figure out your risk tolerance and create a portfolio that is good fit for you. Contact us here to learn more.