How to Increase your Investment Risk Tolerance
Put the big picture in front of you first.
It is important to step away and look at all of your investments as one. By doing this it will be far more stable. It is necessary to look at the overall portfolio for this will allow you to increase the risk of your individual investments.
Study, read and educate yourself.
It is a good idea to try and get information from books or classes. A good book to read that would be very helpful is “Investment Policy – How to Win the Loser’s Game” by Charles Ellis. The more you learn about investing the more you will feel comfortable and it will all seem more familiar.
Try to avoid overconfidence.
Having a realistic, stable sense of yourself and your abilities makes for a high tolerance for risk. If you can avoid overconfidence you can then also avoid under confidence. Overconfidence in your investment ability when things are doing well, leads one often to make bigger and more aggressive decisions. If these decisions turn out badly, the investor’s confidence and ego can be shaken drastically.
Try to check your investments less frequently.
Studies have shown that the risk tolerance increases as our investment evaluation period increases. If you check your investment daily, then try to change and do it once a week. And if you check weekly, try monthly and so on.
Work on building an investment support group.
It would be best to have a group of people with whom you have common interest and can discuss your investments. Therefore, it would be a noncompetitive investment group and would help one another to see their investments clearly and keep each one from over-reacting to news headlines and Wall Street.
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