It is important to think about your risk/reward ratio tolerance–terms like “conservative” and “risky” can mean different things to different people which is why it is necessary to think it through. This way, you can also get a feel for what level of risk is necessary to try to obtain a return on your investment, while still staying in your comfort zone. It helps to keep you grounded.

For example, if you don’t want to risk losing your money, you have to be realistic in terms of not expecting a return the magnitude of winning the lottery. That is where the ratio comes into play. Less risk means a lower ratio, the higher the risk, the greater the ratio. This is also why being promised the moon usually means it is either too good to be true or it is extremely risky. Call us if you’d like to talk about this further. We’re always here to help.