Planning For Retirement? - There's No Easy Answer

Knowing Your Financial Risk Tolerance Will Help Make Successful Investments

February 19, 2007
By: Jerry Cole - Retirement, Investment

The shortest distance between two points is a straight line.

It is not difficult to connect two points on paper with a straight line. In life however, there is no such thing as a straight line.

And when it comes to saving and investing our money for future use there is no straight line. Interest rates change. Tax laws change. The economy changes. The list of variables is infinite. So what is the best method for to get from point "A" to point "B" with our savings and investments?

Obviously there is no one answer. Each of us is unique. We all have different goals and objectives.

So where do you start? As someone once said "If we don't start, it's certain we can't arrive". I have found that an excellent beginning point is to examine ourselves with respect to our risk tolerance. This will constantly change, as it should, with time. By knowing your risk tolerance you can, with the help of a financial service professional, embark on a program that will more closely fit your financial objectives.

Risk, which is the chance of loss or the degree of probability of such loss, is inherent in any financial investment. To quantify your risk tolerance for investment purposes you have to consider a number of things. For example, are you influenced by the potential loss more than the potential gain or vice versa? Would you be worried about short-term fluctuations in the value of your investment? How optimistic are you about the long-term prospects for the economy?

Knowing your financial risk tolerance will help both you and your financial service professional select investments in keeping with your goals and objectives.

This is a beginning point. There is of course much to know about your investments. You cannot expect to become an expert in all of the various choices out there. You can however, expect to know yourself, find the help you need and make out a road map to follow toward achieving your financial goals and objectives.

I would not be suprised to find out that many of you may already have had investments for a number of years. But you may be changing jobs, retiring, or changing investment representation. Thus it may be helpful to consider a new beginning point. I will be discussing specifics in future columns. Meanwhile, I invite your questions.

(The opinions expressed are solely those of the author and not Genworth Financial Securities Corporation.)