| The answer to this question is a classic - 'It | | | | Does risk-taking with your hard-earned cash for |
| depends'. Now that you are done rolling your eyes | | | | greater profits appeal to you or does the risk of |
| lets discuss why this isnt an either-or question. | | | | losing it keep you up at night? This answer |
| There are a variety of factors to consider when | | | | determines your appetite for risk. If you are the |
| you are trying to figure out your investment | | | | kind of investor who is willing to take on more |
| priorities. For the sake of this article, we are going | | | | risk for greater potential rewards, stocks might |
| to assume that you are going to be investing for | | | | be the ideal option for you. Otherwise, bonds are |
| the long-term and not for trading purposes. | | | | the way to gos since they are usually more |
| Bearing that assumption in mind, lets go over a | | | | conservative investments which offer lower |
| few: | | | | returns. |
| 1) Age/Investment Horizon- | | | | 3) Time to manage your investments- |
| Historically stocks have a higher rate of return | | | | How much time are you willing to devote to the |
| over the long-term than bonds. In simpler words if | | | | management of your money? If you have about |
| you have an equal amount of money invested in | | | | an hour a day to read up on your company stock |
| stocks and bonds the money invested in stocks | | | | picks and look at stock charts to determine |
| would result in you making more money all else | | | | optimal buy and sell points then managing your |
| being equal. So, if you are a younger investor in | | | | stocks can be lucrative and fun. Bonds involve |
| your 20s or 30s history suggests that you will | | | | slightly less research and don't require active |
| likely make more money if you invest in stocks. | | | | management as stocks might. |
| The longer investment horizon i.e. the period | | | | There you have it. There are pros and cons of |
| between which you invest money and you | | | | owning stocks and bonds. Ideally you will have a |
| liquidate your investments to move into cash is | | | | mix of stocks and bonds in your portfolio and the |
| ideal to weather the different ups and downs of | | | | percentage allocation to each 'bucket' will be |
| the market. | | | | determined by the above factors. |
| 2) Risk Appetite- | | | | |