What is your Personal Risk Level?
Investing, contributing to your 401(k) and building an emergency fund are all important. The hard part is putting it away, but once it’s in the account you need to make sure the money is working just as hard as you are. Evaluating your personal risk level will help you determine the right allocation of investments for your personal goals. What kind of investor are you?
Just like the classic fable of the turtle and the hare, the turtle likes to invest slowly, consistently and in things that have a consistent track record. These individual benefits from automatic investing like setting a percentage aside from their paycheck on a regular basis. This can work if the investor starts young and continues investing throughout his/her lifetime. While the turtle wins the race in the story, the turtle can be at risk of missing out or even being too conservative. You can be a turtle if you start early.
There is nothing inspiring about a work horse, but if you think about it the work horse was instrumental in creating the America we know today. Horses pushed us to new frontiers as we spread from east coast to west coast. Horses worked tirelessly to build the railroads which completely changed the face of our nation. The work horse demands that our money work just as hard as we do, that it takes reasonable risk to make an investment and is investing for the long haul. The work horse if not a race horse, it doesn’t gamble on future winnings, but it moves faster than the turtle seeking new opportunities. The work horse will lose money, but knows that it must keep trying and investing.
The cheetah is waiting until the last minute and wants to make money quick. While the cheetah is fast, it cannot outrace time and if left until the end will take unnecessary risks to make money quick. This investor has trouble remember that no get rich quick scheme every works and if it is too good to be true then it usually is. If an investor is forced to be a cheetah at the end it will need to overcompensate on saving to build a nest egg since the cheetah does not have time on his/her side.
Questions to Ask Yourself
- What is your timeframe for investing?
- Do you have any current debt?
- What is the future use of this investment?
What kind of investor are you? Turtle, Work Horse or Cheetah?
Continue the conversation with us at our podcast where we talk to John Wasik. John is a financial writer and recently wrote Lightning Strikes: Timeless Lessons in Creativity from the Life and Work of Nikola Tesla. We will ask John what type of investor would Tesla have been.