February 8, 2012

When it comes to investing, risk and reward go hand in hand. The phrase "no pain, no gain" comes close to summing up the relationship between risk and reward.

If you plan to buy securities -- such as stocks, bonds, or mutual funds -- it's important that you understand that you could lose some or all of the money you invest.

The reward for taking on risk is the potential for a greater investment return. If you have a financial goal with a long time horizon, you may make more money by carefully investing in higher risk assets, such as stocks or bonds, than if limit yourself to less risky assets. On the other hand, lower risk cash investments may be appropriate for short-term financial goals.

An aggressive investor, or one with a high risk tolerance, is willing to risk losing money to get potentially better results. A conservative investor, or one with a low risk tolerance, favors investments that maintain his or her original investment.

What Is Your Investment Risk Tolerance?

You can take an online quiz to get an idea of your risk tolerance.  The quiz was developed by two university personal finance professors, and is provided by Rutgers University.

Take the quiz here:
http://njaes.rutgers.edu/money/riskquiz/