Determining Where You Will Invest And Your Risk Tolerance

By Mary Maseko in Investing on February 22nd, 2008

-->

by Mary Maseko

Determining where you will invest begins with researching the various available types of investments, determining your risk tolerance, and determining your investment style - along with your financial goals.

With stock markets, learning about the stock market and investments takes a lot of time but it is time well spent. There are numerous books and websites on the topic, and you can even take college level courses on the topic - which is what stock brokers do. With access to the Internet, you can actually play the stock market - with fake money - to get a feel for how it works.

And as a potential investor, you should read anything you can get your hands on about investingbut start with the beginning investment books and websites first. Otherwise, you will quickly find that you are lost.

Determine your risk tolerance

Determining one’s risk tolerance involves several different things. First, you need to know how much money you have to invest, and what your investment and financial goals are.

If you invested in the stock market and you watched the movement of that stock daily and saw that it was dropping slightly, what would you do? In investments in definitely need a stock broker to help you plan on your investment. So don’t go on without one.

Your risk tolerance should be based on what your financial goals are and how you feel about the possibility of losing your money. It’s all tied in together.

Begin investing

Start with an interest bearing savings account. You may already have one. If you don’t, you should. A savings account can be opened at the same bank that you do your checking at - or at any other bank. A savings account should pay 2 - 4% on the money that you have in the account.

If you are just starting out, a good research on the type of investments is the best starting point like money market funds. This will allow your money to start making money for you while you learn more about investing in other places.