Let me suggest a way of thinking about investing. Here are a variety of things that an investor might want to do:
1: Minimize Bankruptcy Risk. (Chance of losing all of money)
2: Minimize Downsides. (Chance of losing some moderate chunk of money)
3: Keep Money Liquid. (Have your money be available for other things)
4: Maximize Upsides. (Chance of gaining some moderate chunk of money)
5: Maximize Speculative Upsides. (Chance of becoming rich.)
These are good things, but when investing, you generally don’t get to pick all of them. For instance, I think my current strategy for my retirement account does a decent job of getting 1,2 and 4.
Now, you and I don’t have to have the same values: As an example: You are throwing all of your money into a startup. That generally goes against 1. If the startup fails, all your money is gone, and so you aren’t minimizing bankruptcy risk. And values can change: Your risk tolerance is not a fixed amount.
So a rough way to start is to categorize “In which order of priority are these goals are important to me right now and what will that be like in the future?”
A lot of investment sites also have these kinds of rough tests to get an idea of your risk tolerance so they can suggest advice accordingly, although they aren’t necessarily perfect. This link seems to explain some of the issues that come up: http://www.businessweek.com/magazine/content/09_32/b4142059711173.htm
A lot of investment sites also have these kinds of rough tests to get an idea of your risk tolerance so they can suggest advice accordingly, although they aren’t necessarily perfect. This link seems to explain some of the issues that come up: http://www.businessweek.com/magazine/content/09_32/b4142059711173.htm
As a side note, if you go to your bank and ask them about investing your money, they will probably make you take one of these tests, and then suggest investments that match your profile (not necessary the best choices, but it could give you an idea of what you can expect).
Let me suggest a way of thinking about investing. Here are a variety of things that an investor might want to do:
1: Minimize Bankruptcy Risk. (Chance of losing all of money)
2: Minimize Downsides. (Chance of losing some moderate chunk of money)
3: Keep Money Liquid. (Have your money be available for other things)
4: Maximize Upsides. (Chance of gaining some moderate chunk of money)
5: Maximize Speculative Upsides. (Chance of becoming rich.)
These are good things, but when investing, you generally don’t get to pick all of them. For instance, I think my current strategy for my retirement account does a decent job of getting 1,2 and 4.
Now, you and I don’t have to have the same values: As an example: You are throwing all of your money into a startup. That generally goes against 1. If the startup fails, all your money is gone, and so you aren’t minimizing bankruptcy risk. And values can change: Your risk tolerance is not a fixed amount.
So a rough way to start is to categorize “In which order of priority are these goals are important to me right now and what will that be like in the future?”
A lot of investment sites also have these kinds of rough tests to get an idea of your risk tolerance so they can suggest advice accordingly, although they aren’t necessarily perfect. This link seems to explain some of the issues that come up: http://www.businessweek.com/magazine/content/09_32/b4142059711173.htm
As a side note, if you go to your bank and ask them about investing your money, they will probably make you take one of these tests, and then suggest investments that match your profile (not necessary the best choices, but it could give you an idea of what you can expect).