It’s funny sometimes to see how investors make decisions by peer pressure with a thought that someone is selling, I must sell too. Investing is more than just buying and selling, someone is selling because he/she wants to. It’s important to learn when is the right time to sell your investments. One of the most important components is risk. Risk will always be on your plate when you’re investing in equity, but do you understand your risk appetite? Let’s learn 5 key points to learn your own risk appetite.
Objective
A lot of your risk appetite differs according to your objectives. Are you investing for your children’s education in 15 years or for your family car in next 3 years? Your long term and short term goals do affect your risk appetite and investment choices. Besides, you might want to invest in different investment vehicles for different objectives. Your income and responsibilities are the major factors to determine your risk appetite for your financial objectives. Take all your investments into consideration.
Patience
Investing in equity is risky as well as rewarding in the long term. Patience is a great skill in investing. Your impulsive actions on minor fluctuations in the market may not let you reach the full value growth of your investments. Besides, your objectives may get affected. Such an impulsive behavior may affect your risk appetite.
Influential factors
Learn about factors that may influence your decisions. There may be untoward times too. Markets may vary in the course of investments. Your financial priorities may differ or income sources may change. Do take a count of the things that may affect your investment decisions. Your compatibility with your investments is necessary to figure out your risk appetite.
Knowledge
You are the decision maker. And knowledge is the strongest support for your decision. It takes a while to learn about markets, to research about stocks and buy the quality stocks in your portfolio. Investing in the early stages of life is rewarding but consistent approach towards knowledge is important. Remember, investing in knowledge is the best investment. Thus whenever you plan to invest in equity, invest as per your knowledge about the stocks and long term sustainability. Your knowledge about the stocks markets may affect your risk aversion.
Dependency
Understand how much do you depend on your investments while you are invested. Understand your family’s dependency too. Your ability to sustain and hold on to your investments may yield fruitful results in the long term. It’s advisable to consult your financial advisor before making a choice to invest. Your dependency may change according to time and as you come closer to your financial objectives.Find your risk appetite here. http://goo.gl/axj3QX
Disclaimer:
The illustrations are used to explain the concept and should not be used for development or implementation of an investment strategy. Past performance may or may not be sustained in future.
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