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What is risk tolerance? Its your ability to deal with investment losses usually in the short-run to have the chance of earning higher long-term returns than you would get in a bank account.

On the one hand its about how much you can afford to lose.
On the other hand, its also about how much money you can emotionally tolerate losing.

Its extremely important to your success as a long-term investor to know your tolerance for risk. Its a key part of designing an investment program that is appropriate for you and for picking individual investments.

What You Can Afford to Lose: An examination of your individual circumstances is required to figure out how much of your nest egg you can afford to lose in the short-run on investments that promise to deliver attractive growth in the long-term. But there are some general guidelines:

Generally speaking, the more years you have until retirement, the higher your risk tolerance should be.

Conversely, the more likely you are to tap into your nest egg early, the lower your risk tolerance should be.

The Emotional Aspect of Dealing with Risk: Studies of investor behavior show that emotions are a significant contributor to poor, long-term investment performance. Investors tend to get stuck on an emotional roller coaster that leads to poor investment decisions. Here is what the roller coaster ride often looks like:

Investors get excited about investments that have already gone up and buy near the peak in value. When prices drop, investors find it emotionally difficult to accept and will rationalize holding on until prices improve. Then the bottom drops out and investors sell near the bottom, no longer able to cope with the anguish. Emotionally battered, they find it difficult to reinvest near the bottom and end up missing the next move up only to reinvest later on after values have risen above where they had sold (buy high sell low?) Then values peak once again, prices drop and the cycle continues.

Sound like anyone you know? This is why sticking with a disciplined investment plan is so important to successful investing. Overcoming your natural emotional reactions driven by fear and greed is the key. But that is hard to do.

It becomes harder the more risk you accept in your investment plan.

What Percentage of Your Nest Egg Can You Lose? Before designing an investment plan, it is helpful to think about your risk tolerance in terms of a percentage. For example, you might say I am willing to see my portfolio decline as much as 12% for a period of time if it gives me the opportunity to realize better growth over the long-term compared with leaving the money in a risk-free bank account or CD.

Perhaps you could tolerate losing as much as 30% of your nest egg temporarily investing in something you thought could earn you a long-term growth rate as high as 10% to 15% per year.

Build a Disciplined Plan Around Your Risk Tolerance: No matter whether youre a big gambler or a scared chicken, knowing your risk tolerance expressed as a percentage should make it easier for you and/or a financial professional to design an investment program that isnt likely to push your emotional hot buttons.

If the inevitable volatility of your investments remains within your emotional limits, you will be miles ahead in the long run simply from having been able to stick with a disciplined strategy.

You and/or a financial advisor can compare your percentage risk tolerance to the historical volatility (annual standard deviation) of different types of investments and design portfolio allocations that will more likely meet your long term investment objectives while staying within your risk limits.

Calibrate a Mechanical Investment Strategy to Your Risk Limits: With the use of computers and mathematically-based investment strategies, it is now possible to calibrate a mechanical investment strategy to your maximum risk tolerance.

This is what we have done at ConfidentStrategies.com. We have Model Portfolio strategies calibrated for a maximum risk tolerance of 5%, 7%, 12% and 30%. Fortunately, you dont need any financial or mathematical background to take advantage of these sophisticated models as the work is all done for you and presented in the easy-to-understand form of Model Portfolios.

Benefit From Higher Risk-Adjusted Returns: Our Model Portfolios have not only successfully managed volatility risk but increased longer term rates of return. The result has been very attractive risk-adjusted returns compared with more traditional investment strategies. Getting well paid for the risk youre taking may seem like an obvious approach, but few other methods of investing allow you as much control over the relationship between risk and return as mechanical strategies such as ours.

Many of us purchase gold jewellery because – it looks good, our mother said so, it compliments the color of our clothes, its a great possible investment, yaddy, yaddy yah. The reasons are as plentiful as the overly honest dealers who would sell you the gold jewellery.

Perhaps I shouldn’t pass too quickly over the “great investment theme” because its or can be somewhat important to know that “10 Carat gold” all the way up to “18 Carat gold” is generally not considered to be great investment material. And unfortunately the fact that your home insurance will cover it still doesn’t make it investment grade material.

If investment is your reason and you don’t want to buy gold bars or certificates, and of course you want to flaunt your investment on your skin during special occasions then go for jewellery that is at least 22-24 Carat Gold. Typically, the areas of the world where stronger than 18 Carat Gold can be purchased are parts of India,Philippines,Hong Kong and the Middle East

Most jewellers who don’t sell 24 Carat gold are likely to tell you that there is no such thing in jewelry since its too soft for most applications. They do have a point there however from experience I can tell you that 22 Carat Gold necklaces of 110 grams have been known to support the pull of a 22 klg child.

I first started buying gold in Al Khobar, Saudi Arabia. It was, at one time very cheap there. Then I moved on to the gold souks of Dubai and the other middle east commercial centers. Genuine 24K stuff can be purchased there – not the 10K worthless stuff sold in england or the 14K **not-to-die-for* stuff sold as gold jewelry in Canada and the United States.

Truth was, I thought it was 24, but it was often only 97-98% pure, but hey, still better than the 14k fluff sold in North America.

Then I found them. These were the massive jewellery stores on both the Hong Kong and Kowloon side. They sell fantastic pearl, emerald and exquisitely carved gold pieces. We are told and shown paper that indicates that, the HK government certifies what they are selling, but a few of these tourists traps have all kinds of interesting motivational **deals** especially in Kowloon. Anyway, they have certificates claiming their 24 Carat Gold is 99.999% pure, but when I took their stuff to Toronto, I was told oh no, its only 22K not 24.

When I took this material to an internationally known goldsmith to melt down, he again informed me that the material was only 22 to 23 Carats Gold purity. I keep thinking about how embarrassing it would be to pull out one’s own little gold volume/weight measurement tool in one of those massive elite stores and proudly if not loudly proclaim that their 99.999% gold isn’t truly what it claims to be – I am also imagining that one would be set on not unkindly by the police for creating such a golden disturbance.

I am expecting a counter plug where someone will say I am from HK and the government certifies these big shops blah blah but I have purchased big items 4 times in 6 years and each time while trying to sell elsewhere in North America and the UK have been told similar bad news ( Even when I presented the govt stamped HK certificate|It made no difference to the buyers even when presented with the certificate of authenticity which comes with each piece purchased from HK ) Can authenticity certificates be faked? Certainly. Might certain shops fake them? I can’t say.

The lesson to learn perhaps is when buying gold internationally don’t ever fully 100% trust your seller or your buyer because the value of the metal is so high, understand that if either of the two groups can sucker you for even 2-3% of the value, they will, they can and they won’t stop – irrespective of govt certifications blah blah blah.

Lesson learned, when buying precious metals in the form of jewelry internationally don’t ever fully 100% trust your seller or your buyer because the value of the metal is so high, understand that if either of the two groups can sucker you for even 2-3% of the value, they will, they can and they won’t stop – irrespective of govt certifications blah blah blah.

If your goal is truly for investment and you have no real need to put on your bling then buy a regulated certifiable gold bar from a western based dealer who is very much liable in western courts and has both insurance and liability coverage.

If what you are looking to purchase is 14 Carat or below, ignore everything said above since, 14 Carat is not investment quality anyway.

If you are in Hong Kong and not sure if you should buy. Don’t hesitate, just understand that very rarely ever will a street vendor sell you absolutely 24 Carats, even if he/she believes that is truly the gold carat. Dicker the purchase price with the knowledge that what you are getting is substantially more than 22 Carats but really not 24 Carats. Compare this to the North American or even UK experience where you are most likely being sold only 14 Carats.

Wear it, enjoy it, don’t lose it and have fun.

A whole life insurance investment is a relatively simple concept. You will be presented with a product that has a set premium and you will be paid the agreed upon amount of the death benefit at the end of the policy holders life. You will also have an investment component included in the policy. All money you contribute over and above the premium will be placed into a cash value account which is then invested on your behalf by the insurer.

Apart from providing you with cash value account and a guaranteed death benefit to leave to your heirs a whole life investment has some other features as well. You have the option to borrow against the cash value your policy or fully withdraw an amount if you have an emergency need for the funds available during the life of the policy.

The theory behind a whole life policy is that it will pay out set death benefit and a cash value to your beneficiaries all while you are guaranteed a set, unchanging premium for the life of the policy. It does more than this, though, when you consider the fact that all the money is tax free and/or tax deferred.

Because of this tax free feature you will have the ability to make a portfolio that can achieve a number of goals that you otherwise may not be able to. You can actually use the whole life policy to secure a smooth succession in the case of a family owned business or to protect your other assets.

You may be met with derision about your interest in a whole life insurance investment by detractors who say that it isnt a real investment because it isnt run like ones stocks, bonds, and mutual funds. While it may not grow that fast, it has the potential to a much safer long term investment since it is done in a safer manner that is designed to ensure your money keeps growing despite market ups and downs.

A whole life insurance investment policy is generally seen as a “savings asset” as opposed to an “investment asset” because your money is saved and grown in a much less aggressive fashion than regular stocks and bonds. With a whole life insurance policy your additional money will be placed into a savings account where it will accrue interest. You dont have to invest the money within this savings account, but you can do so if you wish to. The savings account on its own, though, will become a huge asset over time.

Many people often wonder why some make it in the stock market and some don’t. They sometimes sigh and say, “They have all the luck, that’s why.” True enough, luck can be a factor in one’s success or failure in the stock market. As most experts will allow, trading at the stock market is very similar to gambling. They both involve a great deal of risk. But unlike gambling, success or failure in the stock market is not solely dependent on luck. It has much to do with two things information and attitude.

Information has much to do with success or failure at the stock market. First of all, information makes stock trading more than just guesswork. Analyzing trends can help investors make educated guesses regarding their investments.

One important aspect that often goes unnoticed is the proper attitude investors must have towards investing. Too often, investors fall prey to the wrong type of attitude in investing. This leads to wrong decisions, and impulsive buying or selling. What are these attitudes, and how should they be avoided?

1. Many Investors Exhibit an Impatient Manner
Unfortunately, many investors get into the mix just because they are under the impression that they could get rich overnight as result of a few investments. This is so far from the truth. In fact, successful portfolios are built over time. Stocks take time to mature and appreciate. If the investor never realizes this, he or she might be looking to make a quick buck. And when he or she is unable to, he or she may become discouraged or may sell his or her shares for a lower price.

2. Many Investors Look to Take the Risk to Be Overnight Millionaires
Warren Buffet, the Wall Street Tycoon has this advice for investors: don’t bet all your marbles on stocks that seem to be skyrocketing today. They could crash tomorrow. Buffet confides that he has always built his empire over stocks that were stable and exhibited continued growth over the years. He says that these stocks are preferable to volatile stocks that could crash anytime.

Other investors fail to diversify their portfolios. Depending on how much risk one is willing to take, an investor should divide his or her portfolio into low-risk, medium-risk, and high-risk categories, and invest in such stocks. Some people are too risky and put their heads on the guillotine with high risk investments. Others will not risk their necks on any investments. One should choose an attitude that is just right for his or her risk tolerance.