Risk and Investing

How risky should a woman be when it comes to investing?

First you have to define risk. One definition of risk is buying something that could cause a permanent loss. For example, if you did not have home insurance and your house burned down, that would be a permanent loss. But let’s say you own a home and the price fell like it did for a few years after 2006.

Unless you were forced to sell the home, you probably would not have sold it. And now prices are coming back up. So although there was volatility in the price of the home, if you did not sell, there was not a permanent loss.

This is the same mentality you need to have when thinking about investing your financial assets. When investing, knowing the difference between risk and volatility is one of many criteria that are important to know. They are not necessarily one in the same.

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