Investing and trading is a very individual practice in that the techniques, strategies and markets you choose should be in part dictated by your personal tolerance for risk. There is no “one-size-fits-all.” We each have our own personal risk tolerance for investing and trading.
People sometimes over estimate their ability to manage risk, being excited about the possibility of big gains. But when they experience the natural ups and downs of the markets and the economy, and they see the roller coaster of swings that their money takes in real life, they get nervous, can’t sleep and experience anxiety.
In short, their ability to make rational actions are hampered, and the quality of their life diminishes.
I recently came across a cool online 5-minute quiz developed my Rutgers University that will help you measure you personal risk tolerance for trading and investing.
It’s a quick multiple-choice quiz of twenty questions (which you can do anonymously), and at the end it gives you your personal risk tolerance score.
After you get your score, it also provides you a list of investments grouped by their potential risk and reward.
It’s fun, and you may find it insightful. Try it out here: