- Tax Planning
- Investments 1: Before you Invest
- Introduction
- Know the Steps You Should Take Before You Invest
- Recognize the Ten Principles of Successful Investing
- Principle 1: Know Yourself
- Principle 2: Understand Risk
- Principle 3: Stay Diversified
- Principle 4: Invest Low-Cost and Tax-Efficiently
- Principle 5: Invest for the Long Run
- Principle 6: Use Caution if You Are Investing in Individual Assets
- Principle 7: Monitor Portfolio Performance Against Benchmarks
- Principle 8: Do Not Waste Too Much Time and Energy Trying to Beat the Market
- Principle 9: Invest Only with High-Quality, Licensed, Reputable People and Institutions
- Principle 10: Develop a Good Investment Plan and Follow It Closely
- Understand the Risks and Benefits of the Major Asset Classes
- Understand the Risk and Return History of the Major Asset Classes
- Summary
- Assignments
- Investments 2: Your Investment Plan
- Investments 3: Securities Market Basics
- Investments 4: Bond Basics
- Investments 5: Stock Basics
- Investments 6: Mutual Fund Basics
- Investments 7: Building Your Portfolio
- Investments 8: Picking Financial Assets
- Investments 9: Portfolio Rebalancing and Reporting
- Retirement 1: Basics
- Retirement 2: Social Security
- Retirement 3: Employer Qualified Plans
- Retirement 4: Individual and Small Business Plans
- Estate Planning Basics
Principle 2: Understand Risk
Risk is inherent in all investment activities. Some risks include inflation risk, business risk, interest-rate risk, financial risk, market risk, political and regulatory risk, exchange-rate risk, call risk, and liquidity risk. The key to managing risk is understanding the different types of risk and investing at a risk level that is comfortable for you.
It is critical for you to find that risk level at which you are most comfortable. Often, taking a risk-tolerance test will help you discover the level of risk that is right for you. A sample risk-tolerance test is included in the Learning Tools section of this website in Learning Tool 16: A Risk-Tolerance Test.
