Final answer:
Throughout your lifetime, your investment risk level should adjust based on your age and financial goals. In the early part of your career, a higher risk level may be appropriate to maximize potential returns. Over time, you should shift to a more conservative approach to safeguard your accumulated wealth.
Step-by-step explanation:
Investment Risk Level Over a Lifetime
Risk tolerance is a key factor in investment strategies and can change throughout an individual's life. During the early part of a career, when time is on one's side, a higher risk level may be appropriate due to the potential for greater returns and the ability to recover from losses. As one approaches retirement, a more conservative approach is often recommended to preserve capital.
Risks You Can and Cannot Change
There are certain risks associated with investment that we can control, like the amount of money we invest in high-risk assets, or our level of diversification. Other risks, such as market volatility and economic downturns, are largely out of our control. By adjusting our investment strategies and risk levels throughout our careers, we can better manage controllable risks while preparing for those we cannot change.
Risk Level in Early Career
For those in the early stages of their career, it may be beneficial to adopt a higher risk level. This can include investments in growth stocks, mutual funds, or other vehicles with higher potential returns. However, it is crucial to balance risk with the need for a diversified portfolio to mitigate potential losses.