One of the first steps you should take when you form an investment plan is determining how much risk you should tolerate.
Thursday, August 5th 2004, 9:45AM
by The Landlord
This depends on many factors, such as how long you are planning to invest for and whether short-term fluctuations will keep you awake at night.
Often, emotions get in the way of making the right choice when it comes to risk. People can get greedy and seek high returns without considering the risk involved, and are then very disappointed and possibly even angry when they lose money, even if it is only a temporary downturn.
Greed is what causes people to overlook the risks of the 'investing' scams that have been in the media recently, which promise enormous returns but are usually fraudulent.
On the other hand, other people might let fear control their decisions, opting for an inappropriately 'safe' investment with lower returns, or cash in the bank earning no returns. They let their fear of losing money in the short-term get in the way of their long-term goals.
