Why It Is Important To Understand Your Risk ToleranceWhy It Is Important To Understand Your Risk Tolerance

Before you step into the stock market, it is important to know that risk tolerance is a psychological trait that is genetically based. It is positively influenced by education, income, and wealth, which means as these increases, risk tolerance appears to increase slightly. Risk tolerance is negatively influenced by age. For example, as one gets older, risk tolerance decreases. Basically, in simple words, risk tolerance is how you feel about risk and the degree of anxiety you feel when risk is present. Technically, risk tolerance is defined as the extent to which a person can prefer to take the risk. Generally, all humans vary in their risk tolerance, and there is no right balance here.

You must also note that the risk tolerance is also affected by your perception of the risk. Consider an example that flying in an aeroplane or riding in a car would have been perceived as very risky in the early days, but less so today as flight and automobile travel are common occurrences. Therefore, many of us will feel today that riding a horse might be dangerous with a good chance of falling or being bucked off because few people are around horses.

Thus, with this example, you will get to learn that the idea of perception is important, and especially when we are talking about investing. When you learn more about investments that how stocks are bought and sold, how much volatility is usually present, and the difficulty or ease of liquidating an investment then you will think that stock investments are not at all risky. You thought that it is damn risky before making your first purchase but once you know everything about it, you feel no risk in it. Thus, as a result, your nervousness is less intense, even though your risk tolerance remains unchanged as your awareness of the risk has changed.

In simple and plain concept, you can avoid those investments which are likely to make you anxious¸ by simply understanding your risk tolerance. Usually, you must never buy an asset that keeps you from sleeping in the night and makes you worried every time. It is believed that anxiety stimulates fear that triggers emotional responses rather than logical responses to the stressor. All such investors, who can be patient and follow an analytical decision process invariably comes out ahead, when there is a period of financial uncertainty. You can get more such unusual tips from the technical analysts of Money Classic Research, who are capable of generating accurate stock market tips.

by Robin Schott
References and Bibliography

We provide information related to stock and sharemarket with the objective to nurture the investors and the traders by offering them technical and fundamental research assistance.

For more info visit: http://www.moneyclassicresearch.in

Rated:NR/0 Votes
9 Views
Add To My Article Reading List
Add To My Article Reading List
Print Article
Print
More Article By Robin Schott
More Article by Robin Schott
Share
More Articles From Financial Planning
More Articles From Financial Planning
Related Articles and Readings
So What is This Stock Market Thing Anyway By: Mika Hamilton
We've all heard of the stock market and probably have a general idea of what it is and how it works either from high school economics classes, television financial reports, and the countless film depictions of what happens on the floor of the New York Stock Exchange. But how ...
At What Price Are You Comfortable Buying A Stock At By: Larry Potter
The first thing you have to decide when you are going to buy a stock is "what price are you comfy with buying it at?" In other words, let's say you like the idea of buying XYZ and with XYZ trading at 50, you think it has 5 or ...
An Overview of the Douala Stock Exchange By: Ashu Felix Tambong
The stock Market appears again, often to wrong, as a world apart and often a reserved universe to the initiated. Some think even that if one does not do left the warn, one risks doing more bad deals than of good ones. Nevertheless the potentialit's remain attractive on ...
How the Stock Market Works By: John Mussi
In order to understand what stocks are and how stock markets work, we need to dive into history--specifically, the history of what has come to be known as the corporation, or sometimes the limited liability company (LLC). Corporations in one form or another have been around ever since one guy ...
Factors Causing Fluctuations in Canadian Stock Market By: Patrick Johnson
Canadian Stock Market is one of the largest markets. The volume of this market is going on increasing with more and more national as well as international investors reposing faith and taking interest in the market. ...
The information provided in this article and/or the comments is the sole responsibility of their respective authors and does not necessarily reflect the opinion of ezinepost.com. ezinepost.com  does not endorse any article and/or comments published by our web users unless otherwise noted. 

Member Panel

login to submit articles and more

StatisticsEZINEPOST.COM

  • » Active Categories: 419
  • » Active Articles:252096
  • » Active Authors:32163
  • » Active Members: 35787
  • » Statistics Updated:
    - Sat Aug 11th, 2018 01:04PM EST