Somewhat similar to Defining Your Objectives, Defining Your Risk Tolerance requires one to look within. Try to do what others seem to miss. Try asking yourself this question: "If I invest in this/these stock(s), how will my mood, life, day-to-day activities be affected if it/they do poorly for whatever reason?"

If your answer to the above is; "Not a big deal" you have passed the first hurdle of investing: Not to panic. One typically panics when one hasn't thought through short-term negative possibilities. Imagine, after having purchased your first home, the paper boy dropped off your local newspaper that first Sunday and in the headlines on Page 1 it stated in 30 point bold: YOUR HOUSE IS WORTH $2,000 LESS! You would do what? You would probably panic somewhat. Why? Because it is unexpected and you were probably unaware of the necessary risk tolerance needed to deal with the day-to-day or in this case, the week-to-week fluctations in your house's market value. Luckily, no one seems to be posting people's house values every Sunday. But, they do publish, in the paper and on-line, equity prices.

So, do yourself a favor. Try to think through the worst that could happen with any investment prior to investing. Then and only then will you realize that you can handle any scenario that plays out.

 

Personal Wealth Management

To manage one's wealth successfully, one needs to understand the overall objectives as well as the individual hinderances (whether they be personal, family or work related) that at times, will get in the way. If you take the approach that things are destined to try and get in the way of managing your wealth, you will carry that resolve through many of those previously unidentified issues.

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