Each individual has a risk tolerance that should not be ignored. Any good share broker or financial planner will know this, and they should take the initiative to help you find out what your risk tolerance is. Then, they need to act with you to find investments that do not exceed your risk tolerance.
Determining one's risk tolerance involves several different things. To start with, you have to know how much funds you have to put in, and what your investment and financial objectives are.
For instance, if you are retiring in ten years, and you've not saved a single penny towards that end, you need to have a high risk tolerance - because you will need to do some assertive - risky - investing in order to achieve your financial goal.
However, if you are in your early twenties and you like to start investing for your retirement living, your risk tolerance will be lesser. You can afford to watch your money grow slowly over time.
Realize of course, that your need for a high risk tolerance or your need for a low risk tolerance basically has no bearing on how you consider risk. Again, there is a lot in finding out your tolerance.
For example, if you invested in the stock market and you observed the movement of that stock day by day and saw that it was dropping slightly, what would you do?
Would you sell out or would you let your money ride? If you have a low tolerance for risk, you would seek to sell out... if you have a higher tolerance, you may allow your money ride and see what are the results. This is not driven by what your financial goals are. This tolerance is based on how you feel about your money!
Again, a good financial planner or stock broker should help you determine the level of risk that you are convenient with, and help you decide your investments correspondingly.
Your risk threshold should be according to what your monetary goals are and how you feel about the possibility of losing your money. It's all linked with each other.
A good financial planning consultant can also inform you on the risk elements related to different kind of investments such as venture capital and seed money investing against putting money in a company going public, or even a reverse merger, or some other public mergers.
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