Always pay yourself before you write checks to pay your bills. Take inventory of your personal finances. When you determine that amount, plan on sticking with it over time. Identify your risk tolerance level. Risk is the price volatility of a particular investment.
Every investment moves up and down in price.
Generally, those with above-average profit potential go up and down in price more than those with less profit potential. There's no such thing as avoiding risk. If you choose an investment that seems to offer no risk, you can lose purchasing power because your returns may fail to keep pace with inflation, eroding your standard of living. Knowing your tolerance for risk also helps to narrow down the many investment opportunities available to you. And there are many from which to choose, ranging from savings vehicles and fixed income investments to stocks and mutual funds.