What is Your Risk Aversion Level Regarding Investments in Madison, CT?
If you’re on the hunt for good investments and you need some help in Madison, CT, one of the first things you’ll talk to your investing advisor is risk aversion. In general, risk aversion refers to the types of risks you’re willing to take. Are you comfortable with taking the everyday risk of driving a car? What about a motorcycle? Risk aversion in investing terminology refers to the risks you’re willing to take with your money.
Big Payoff vs. Safe Bet
In life, risk aversion isn’t as neat as it is when you’re considering investments. We are pretty bad at assessing realistic risks. For example driving a car is one of the most dangerous things you can do in Madison, CT as well as in the rest of the country, statistically speaking. But most of us just go about our days as if we were doing something perfectly safe and normal. Fortunately, risk assessment in investing is very different.
Usually, if you are willing to take a bigger risk, the payoff is also typically bigger. If you don’t want to take big risks, the money you make on your investments may not be much, but it will be steady and dependable. For example, one of the most dependable investments you can make is a U.S. Treasury Bond. Why? Because the U.S. Treasury is not going to default or close or refuse to give you your money back. The interest rates on U.S. Treasury Bonds are not very high, but you know you’ll make money in the long run.
The stock market is much more of a high risk investors game. In fact, some people would even compare buying and selling stock to gambling. Of course it’s more complicated than that, but people who invest in risky stock are taking a chance. There is no guarantee that you’ll make money, and you may even lose money. Different stock present different levels of risk, however, and some companies just keep going up.
Choosing Carefully and a Balanced Portfolio
Most people end up with an investment portfolio that is balanced, based on your personal risk aversion level. If you like to take a few risks just in case you get that big payoff, you’ll probably have a few risky investments in your portfolio. But you’ll probably add a few safe investments in there and some that are probably going to be good investments, but are medium risky.
No matter what, don’t make any investments in Madison, CT without talking to someone who can help you determine what types of risks you are willing and able to take.
For sound advice about investments, visit the local branch of Essex Savings Bank here in Madison, CT.