Here are some things to think about when determinating the amount of risk that best suits you.
Financial Goals
- How much money do you want to accumulate over a certain period of time? Your investment decisions should reflect your wealth-cretaion goals.
Time Horizon
- How long you can leave your money invested? If you will need your money in one year, you may want to take less risk than you would if you won't need your money for 20 years.
Financial Risk Tolerance
- Are you in a financial position to invest in riskier alternatives? You should take less risk if you cannot afford to lose your investment or have its value full.
Inflation Risk
- This reflects savings' and investments' sensitivity to the inflation rate. Some investments such as savings account have no risk default, there is risk that inflation will rise above the interest rate on the account.
