Investment Basics II: Risky Business? The Nature of Investing

In section 1, we introduced what investing is, along with why people invest their money rather than save it in cash. In this section, we understand that everyone’s unique, and so are their investing goals, needs, and style.

The investment plan that’s right for you depends largely on the level of comfort that you have when it comes to risk. You can’t completely avoid risk when it comes to investing, but you can manage it.

We typically group investors into three categories for the purpose of discussing risk tolerance:

  • Aggressive: those who have a high degree of risk tolerance
  • Moderate: those willing to accept a modest amount of risk
  • Conservative: those who have a low risk tolerance

You want to begin thinking about which category you most align with by asking yourself two questions:

  1. How much loss can my investment plan handle?
  2. How comfortable am I with risk?

This is important to figure out because when it comes to investing there’s a direct relationship between risk and potential return.

More risk means a greater potential return, but also a greater chance of loss. Conversely, less risk means lower potential returns, but less likelihood of loss as well.

This is known as the risk/return tradeoff, and it applies to investment portfolios as well as individual investments.

What it says is that you can’t have it all. There’s a relationship between growth, income, and the stability of your investments, and when you move closer to one, you generally move away from another.

It’s a dilemma all investors face. Only you can know your risk tolerance for investing, but there are tools online to help you.

In section 3, we’ll go into the different types of investments you can use along with their risk levels and tradeoffs.

As experienced financial professionals, we help clients like you figure out the best investment plan for their situation, so that you can put your money to work with peace of mind.

Please connect with us and let us help you plan for your future. We would be delighted to go on the journey
with you.

Confidence Wealth Managementis a sophisticated Private Wealth Management firm that specializes in what we consider to be next-level, advanced strategies and solutions to protect and prudently grow your wealth.

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Confidence Wealth Management LLC (CWM) is an SEC registered investment adviser. Confidence Wealth & Insurance Solutions LLC (CWIS) is licensed under the NV Department of Insurance, license no. 3647322. CWM and CWIS are two separate affiliated companies. All investment advisory services are provided by CWM and all insurance products and services are provided by CWIS. CWIS does not provide any investment advisory services and CWM does not provide insurance services. CWM and CWIS have no affiliation with government, state, or local agencies. Consult with an attorney or CPA for usage of tax or legal concepts. This material may contain information that are close approximation to the totality of information available to us and not necessarily specific within regards to one situation or another. Some opinions and statements are informational. They are not investment advice as they may not be complete in terms of all details needed to affect an action you wish to undertake, investment strategy or plan. Pursuant to IRS Circular 230, the material is not intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. No estimates used are a promise of return. Also, many opinions are summaries and may not reflect all pertinent facts relevant to you. Any information given is to be considered general, and nothing said herein should be used as a basis for investment decision unless you consult with your Confidence Wealth advisor that can understand your unique situation and give you a customized solution with a complete disclosure. Past performance does not indicate future results. As you know, no one can predict the future. Thus, any forecast in this material is intended strictly as a possible future outlook and not a statement of fact as there could be any scenarios that are not in your favor when making a decision. You must examine all adverse and negative implications on any forecast when made. All information is based on the date of the material and may not be valid, may change, and/or may not be true any longer as time passes. Also, the Form ADV Part 2A for CWM contains detailed disclosures regarding our services and fees, along with applicable conflicts and how we address such conflicts. A copy of our Form ADV can be obtained by calling (310) 824-1000.