4. Determine Your Risk

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You should always be aware of potential risks no matter what kind of investments you are making. Thus, determine your risk tolerance.

You can do this by asking yourself a few questions. This is usually a brief series of survey questions, these will assist you in determining your level of risk tolerance depending on the answers you choose. Take this Investment Risk Tolerance Assessment and determine and define your boundaries. 

Remember that your risk tolerance is not the same as your risk capacity. Risk tolerance measures your readiness to take on risk in exchange for a larger reward. It’s just an estimate of your emotional response to volatility and losses. On the other hand, risk capacity is the measure of how much risk you can afford to face.  

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