One Report to Answer all your Questions!

Get your Portfolio Verdict now

What is the Risk Ability and Willingness/Tolerance in Investing?

Team MoneyWorks4Me May 11,2018 2769 2 min read

Risk Willingness/Tolerance and Risk Ability:

Investments should be made logically, with an attempt to minimise risk while meeting your long term financial goals. Whenever there is uncertainty of what the outcome will be, there is a risk. People react to risks or uncertainty differently. And, it has a big impact on how they invest, and hence, on actual returns earned. Risk Willingness or Risk Tolerance is the degree of uncertainty that you can withstand, without losing sleep. It is highly situational, difficult to measure accurately, and it changes over time. Often, investors may feel and profess that they are willing to take risks. But, a sudden drop in the market makes them panic and sell out at unfavourable prices.

Risk Ability or the answer to ‘Can I afford to take risks?’, is the capacity to bear risk or sustain losses without a significant impact on your lifestyle. It is high when you have time (years) on your side (to wait for the returns to happen) for both compounding to work and to wait through market corrections, even if it takes a few years. It’s precisely this reason that we insist you look at your Investable Surplus, the money you don’t need for a long time.

Risk Willingness and Risk Ability are influenced by a person’s age and stage of life.

In general, Risk Willingness decreases after a certain age. Younger people with a steady and growing income and with double income have high Risk Ability.

Stage of Life	Foundation	Accumulation	Maintenance	Distribution
Age	(20 – 30) Young	(30 – 60) Middle age	(60+ – 80) Senior citizen	(80+) Old
Earnings, Savings, Wealth	Just starting to earn. Expenses are low, savings begin	Earnings have increased. If expenditure is controlled savings can increase at a faster rate	Retired, dependent on returns from accumulated wealth	Formalise transfer of accumulated wealth to descendants
Time Horizon	Long-term: 30+ years till retirement	Long-term: Current earnings exceed current expenditure	Medium-term: Needs to change from growth assets to investments which provide a steady income	Short-term
Risk Willingness/ Tolerance	High: No dependants, does not fear losses	High going to Moderate: Confidence in earning ability, more mature in handling risk, understands the need to grow wealth for future	Low: Loss of regular income, need to conserve wealth rather than grow wealth	Low: Ensure that accumulated wealth is sufficient to support lifespan and leave legacy to heirs
Risk Ability	Moderate to High	High and then Moderate	Moderate/Low	Low

An Investor who has a high Risk Willingness, but a low Risk Ability should not make high risk investments. On the other hand, a person who has a high Risk Ability but low Risk Willingness can take the right risks.

If you liked what you read and would like to put it in to practice Register at MoneyWorks4me.com. You will get amazing FREE features that will enable you to invest in Stocks and Mutual Funds the right way.

Already have an account? Log in

Want complete access
to this story?

Also get more expert insights, QVPT ratings of 3500+ stocks, Stocks
Screener and much more on Registering.

Tags: Portfolio

Category: Learning

Team MoneyWorks4Me

A team of business leaders, equity research analysts & investment counsellors. Started in 2008; experienced in equity research, financial planning and portfolio management. Passionate about providing institutional quality research and advice to Retail Investors in a simple easy-to-understand-and-act manner.

SEBI Registered: Investment Adviser - INA000013323

Name of the IA registered with SEBI:	The Alchemists Ark Pvt. Ltd.
Logo:
Trade/Brand Name of IA:	MoneyWorks4Me Investment Advisers
Brand Logo:
SEBI Registration Number:	INA000013323 Validity - May 16, 2019 - Perpetual
Registration:	Non-Individual
BSE Enlistment No:	1187
Address:	B-101, Signet Corner Building, Balewadi Phata, Baner, Pune, Maharashtra 411045
Compliance officer Details:	Name: Shrikant Jagtap Email: shrikant.jagtap@moneyworks4me.com Telephone: +919860359463 Address: Same as IA
Grievance Officer Details:	Name: Mukta Vaze Email: mukta.vaze@moneyworks4me.com Telephone: +91 98609 19463 Address: Same as IA
Principal Officer Details:	Name: Atharva Bhide Email: atharva.bhide@moneyworks4me.com Telephone: +91 91758 99463 Address: Same as IA
Standard Warning:	Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Disclaimer:	Registration granted by SEBI, enlistment with exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

Warning: Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

Disclaimer: Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provides any assurance of returns to investors.

Compliance Officer:

Name: Shrikant Jagtap

Email: shrikant.jagtap@moneyworks4me.com

Mobile No: +91 97638 00745

Grievance Officer:

Name: Mukta Vaze

Email: mukta.vaze@moneyworks4me.com

Mobile No:+91 98609 19463

Principal Officer:

Name: Atharva Bhide

Email: atharva.bhide@moneyworks4me.com

Mobile No:+91 91758 99463

SEBI regional/local office address -

Plot No. C 4-A , G Block, Near Bank of India, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra 400051

Address:

The Alchemists Ark Pvt. Ltd., B-101, Signet Corner Building, Balewadi Phata, Baner, Pune, Maharashtra 411045

Data provided by Accord Fintech Pvt. Ltd.

*Color code for outperformance consistency

*Number is average 3 year rolling returns

Want to invest successfully in stocks?

How the heck do you select a solution that ensures it?

Check how good is your current solution!

Does it get you focused on meeting your financial goals?

Investing is to means to funding your goals. Your solution must help you get clarity of your goals and how you should invest to reach them. Does your solution include Financial Planning?

Does it have a way of investing that you are confident will work for you?

Are you clear of the rationale behind recommendations?

Do you have a way of answering the most important questions: Which stocks are worth investing in, at what price and how do you build your portfolio?

Does it make it easy to find opportunities without wasting your time?

Are you spending too much time finding opportunities?
Do you have a way of knowing when opportunities from your chosen set of stocks arise in the future?
How confident are you about them?

Does it share the tools to enable decision making transparently?

Finally stock investing is all about make informed decisions.

Does your solution provide easy-to-use decision enabling data, information and tools?

Does it help you become a better investor

You will be investing for decades, for the rest of your lifetime.

Does your solution help you learn what is required to invest successfully?
Does it share knowledge and tools that you master as you invest?

Do your Financial Planning

like a Pro and be a Man with a Plan to reach all your goals

Invest using Quality-at-Reasonable-Price(QaRP)

way of investing-the most suitable way for retail investors

Know the opportunities right

for you now and as they arise in the future without wasting your valuable time

Invest with conviction

using a fully integrated System for Making Informed Decisions

Read How the Heck to Invest and Reach Nirvana,

a book by Raymond Moses-Founder that will guide you through the 5-Step Journey to Financial Freedom

Kya aapka
Portfolio
Sahi Hai?

Check your

Portfolio

Health!

What is the Risk Ability and Willingness/Tolerance in Investing?

Risk Willingness/Tolerance and Risk Ability:

Risk Willingness and Risk Ability are influenced by a person’s age and stage of life.

Want complete access
to this story?

Team MoneyWorks4Me

Comment Your Thoughts:

Comments:

Do your Financial Planning

Invest using Quality-at-Reasonable-Price(QaRP)

Know the opportunities right

Invest with conviction

Read How the Heck to Invest and Reach Nirvana,

Our Wealth Creation Solution

Omega

Related Blogs

Nifty and Sensex - Stop Guessing the Bottom

Union Budget 2019: Overview

INTERIM BUDGET 2019

Union Budget 2021: Budget like never before in last 6 years

What Football can teach you about Stock Investing!

Trending Blogs

How to Choose Good Stocks: Check for an Excellent Financial Track Record

Decoding the Indian Banking Industry – Discussing its structure and business model

How has MoneyWorks4me performed in the past?

What is Inflation? How does it affect the Common man?

Beta Analysis: How useful it is for Stock Selection?

Categories

What is the Risk Ability and Willingness/Tolerance in Investing?

Risk Willingness/Tolerance and Risk Ability:

Risk Willingness and Risk Ability are influenced by a person’s age and stage of life.

Want complete access to this story?

Team MoneyWorks4Me

Comment Your Thoughts:

Comments:

Want complete access
to this story?