Volatile Times in the Market Raise Lots of Questions.
Wondering how to invest and what to invest in? Your first step should be to formulate an investment strategy. To do that, ask yourself these questions concerning your exceptions and preferences.
- What period of time are you investing for?
A short-term investor needs the money in one or two years. An intermediate term is two to five years, while a long term is at least five years.
- What are your investment objectives?
Investors committed to growth are looking for capital appreciation, with income a secondary concern. Total return investors want a balance of income and capital appreciation. Income investors are most concerned about interest and dividend income, with capital appreciation secondary. Individuals interested in preservation of capital are more concerned with protecting their principal.
- How risk tolerant are you?
Those uncomfortable with the thought of losing more than 5% of their principal in one year have a low tolerance for risk. A moderate tolerance could stand a loss of 5% to 15%, while a high tolerance could withstand a 16% to 25% loss.
Your answers to these questions may change over time, so it is important to review them periodically to ensure that your current investment strategy is appropriate.
Whatever your strategy, your decision to invest is an important step in planning for your future.