There is no right or wrong personal risk tolerance, but investments should never cause you to loose sleep. As rates of return become more uncertain, investors expect higher returns. The tradeoff between risk and return is fundamental to all financial decisions, and consequently, to implementing an investment strategy. The length of time that investments will be held is the single most important factor in any financial plan. The following diagram illustrates the approximate returns after inflation for stocks, bonds, and T-bills during this century, and demonstrates the effect of time on historical investment returns.
Historical performance is never a guarantee of future results.
The return on equity securities exceeds the return on fixed income investments over long periods. Investments that are appropriate for long-term financial goals are inappropriate if the investment time frame is relatively short. Different categories of investments typically do not all perform well at the same time. For example, stocks and bonds often react differently to the same economic or political news. Your financial and investment advisor can provide you with more information on an appropriate investment risk and asset allocation strategy and should be consulted before any action is taken.