What makes up your risk profile
Time, capacity and tolerance. Three questions, and the lowest answer wins.
For educational purposes only. Simplified illustrations to help you understand how things work. Not financial, investment or tax advice, and not a recommendation.
The rule: the lowest of the three sets the limit, not the average.
When do you need the money?Several market cycles ahead.
Could you afford a loss?A loss would hurt, but other goals stay on track.
Could you live with the swings?You prefer a smoother ride.
Cautious
Mostly stability, with a little growth.
Your time horizon is setting the limit. The others could handle more, but going past the lowest one often ends in selling at the worst time.
A simplified illustration, not a risk assessment. A real one also looks at net worth, income, debts, insurance and taxes.
- Time horizon: when you need the money
- Capacity: whether you can afford a loss
- Tolerance: whether you can live with the swings
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