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Before You Start Investing: Assess Your Investment Risk — Understanding Risk Capacity
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Understanding Risk Capacity

What’s Your Risk Capacity?

Risk capacity isn’t based on your personal feelings about risk. Instead, it relates to how much risk you can actually afford to handle. Risk capacity has to do with your age, your financial situation and investment goals, as well as the amount of time you have to invest and your ability to withstand loss.

When assessing your capacity for risk, ask yourself questions like:

  • How much time do you have before you need the money?
  • How much money do you have at the moment?
  • Do you have a regular source of income to help you withstand any investment losses?
  • How much cash reserve do you have?

It’s worth keeping in mind that markets are known to recover from downturns and positive years outweigh the negative. That said, you should give careful consideration to your ability to stay invested during challenging periods. A steady source of income will help you weather the storm when the markets are down as you pursue higher potential returns.

Investment goals also play an important role in your risk profile. Tap Next to see how you can access the degree of risk you need to take to meet your personal financial objectives.