Before you start an investment plan and structure and investment portfolio you must start with an honest appraisal of your own personal comfort zone with regard to risk. Some investors can accept short-term volatility with composure, others with near panic. So whether you consider your investment temperament to be conservative, moderate or aggressive, you need to focus on how comfortable or uncomfortable you will be as the value of your investment moves up or down. A good barometer in judging your risk tolerence is if you can't sleep at night for worry about the value of your mutual fund shares, you are being too agressive with your investments. Recognizing the type of investor you are will go a long way toward helping you build a meaningful portfolio of investments that you can live with.
All investments involve some form of risk.
Even a federally-insured bank account is subject to the possibility that inflation will rise faster than your earnings, leaving you with less real purchasing power than when you started. Consider these common types of risk and evaluate them against potential rewards when you select an investment. Also known as systematic risk. At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. When this happens, the stocks of both an outstanding, highly-profitable company and a fledgling corporation may be affected.