How to think about risk and risk tolerance

The saying “no risk, no reward” applies in many contexts, but none more so than with investing.

Risk is a fundamental aspect of investing. If you buy securities, especially illiquid securities in the private capital markets, you should understand that your capital will likely be locked up for a considerable period of time and that you could lose some or all of your investment.

Reward is the payback for taking the risk in the first instance. The longer one is willing to wait to get that reward may impact the level of risk he/she is willing to take on in the first place. People tend to invest in less risky near term investments, if their investment horizon is short, and longer term investments, if their investment horizon is long.

Of course, there is no one way to do things and everyone has a different tolerance (appetite) for risk. Here are some additional considerations as you work and plan for financial freedom. Visit our Learning Center for more information.

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Before you do anything, consider speaking with a financial advisor and learning more here.

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