Before you can decide on a personal investment strategy, you must consider how much or how little risk you are prepared to take with your money. Time horizons - the amount of time you have to meet your financial goals and to make up for any losses you might experience. People with long time horizons may be more willing to endure periodic fluctuations in the value of their investments. Emotional factors - your emotional response to risk and to changes in the value of your investments. Some people are quite comfortable with the ups and downs of the market, while others lose sleep when their investments fluctuate in value.
Risk tolerance is a personal issue.
You should never feel obliged or pressured to take more investment risk than you are comfortable with. Remember though, that there is no such thing as a high return - risk free investment. You cannot expect to make high returns on your investments if you are not prepared to accept the risks that go with them. Every investment product has its own risk profile. Some can be very high risk, others very low.