How much money should you invest?

A short thread on how much risks you should take in wealth creation.

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Find out your risk profile.

It tells you how much risk you’re comfortable with.

Risk profile is a fine balance between your:
• Goals
• Risk tolerance
• Life circumstances — Age, Income, Savings.

Here’s how each factor impacts your investment.

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Age.

The younger you are, the more risks you can afford.

In your 20s, investing in riskier portfolios:

- sets you up to take advantage of higher returns over the long run,

- gives you time to ride out any short-term losses.

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Is your job/business stable?

If your income stream(s) is risky, be cautious in investing in high-risk portfolios.

Don’t put yourself in a dangerous position that can wipe out all your savings.

Offset your job/business risks by investing in a medium-to-low risk portfolios.

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Savings/Expenses Ratio.

Low savings. High expenses.
• Invest in less risky portfolios

High savings. Low expenses.
• More flexibility to invest more in riskier portfolios

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The timeline of your goals affects your risk tolerance.

Take more risks for long term goals:
• Retirement fund
• Emergency fund

Take lesser risks for short term goals:
• House fund
• Vacation fund
• Start-up capital

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Risk tolerance.

Everyone’s comfort level is different.

Just because your life circumstances are ideal, it doesn’t mean you have to take higher risks.

Taking high risk during good times is easy.

But can you endure the down times and cash out your investments at a loss?

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Invest according to your risk profile.

Life circumstances and timeline of your goals are measurable.

But only you can decide your risk tolerance.

Be honest with yourself.

You shouldn’t lose sleep over your investments.

Invest wisely, grow your wealth.