Everyone has a different attitude to risk and their attitude to risk may/will vary over their lifetime, most of us becoming more risk adverse as we get older. In simple terms on a scale of 1 to 10, if 1 is putting your money in a tin box under your bed then typically Australian mining shares would be 10. Although there is always a risk to the tin box!
Choosing the right investments means balancing how much you are prepared to lose with how much you hope to earn.
This means understanding risk and your attitude to risk – how much risk you are prepared to take with your money and assets in a particular time-frame.
This can be affected by many factors, including your personal situation, age, goals and the current economic climate.
Where have you heard about attitude to risk?
If you talk to a financial adviser they should ask you about how much risk you are prepared to take with your money. You may also find questions about attitude to risk on investment applications forms or online investment platforms.
What you need to know about attitude to risk...
Usually, the higher the risk you are willing to take, the higher the potential returns could be – but equally, the higher the risk of losing your money too.
Low risk investments are likely to offer lower rewards, but have less risk attached too. You have to choose the options you are comfortable with.
Your attitude to risk can of course change over time. You might become much less risk averse if you came into a big sum of money, for example, or much more risk averse if you start to have a family and need to think about securing your children's future too.