Your Risk Tolerance
Before you can decide on a personal investment strategy, you need to consider how much or how little risk you are prepared to take with your money.
Risk fits into the overall issue of suitability. Every registered investment advisor in Canada is required by law to recommend only investments that are appropriate for an investor’s goals, financial situation, and risk tolerance. Go to the Know Your Advisor section to find out more about working with a registered investment advisor.
Factors that Affect Your Risk Tolerance
- Time Horizons – The amount of time you have to meet your financial goals and to make up for any losses you might experience. People with long time horizons may be more willing to accept more risk than those who are saving to meet a short-term financial goal.
- Cash Requirements – The extent to which you depend on your investments to meet day-to-day expenses. Investors who rely on their investments to meet daily living expenses will be much less comfortable with the risk of losses.
- Emotional Factors – Your emotional response to changes in the value of your investments. Some people are quite comfortable with the ups and downs of the market, while others lose sleep when their investments fluctuate in value.
Take our Risk Test to help determine how much risk you feel comfortable with.
How much risk do you feel comfortable with? How much risk can you afford to take? Your appetite for risk will depend on your personal goals, life stage, lifestyle, timeline, and knowledge. Take this test to discover more about your personal risk tolerance, a key criteria in all investment decision-making.