Investing is a matter of taking risks on some unknowns. There are some factors that an individual should consider when contemplating whether to take the chance on investing, and how much risk they are willing to take.
- Age: Number one risk factor- an individuals age should have an impact on what they do with their money, because their age typically will correlate with whatever stage of life they are currently in. The younger the risk is not as great as for someone reaching retirement age.
- Health: Number two risk factor- if the individual has any acute illnesses, no matter what age, they may want to choose a different direction about how to invest their money. An example of this would be if the money is needed immediately for medical bills or long term care facilities, they may want to liquidate their life insurance, sell their investments, or utilize the monies in their 401(k), even if that means their will be an IRS penalty on top of paying income tax with that.
- Wealth: Number three risk factor- when there is already great wealth for an individual, the risk is much more affordable. They have the ability to lose a piece of their assets, and it will not devastate them as it would someone who does not have access to those types of assets.
- Taxes: Number four risk factor- this comes into play if the goal of the individual is to defer taxes or want to pay as minimal as possible. With this they may want to purchase stock that is high-growth companies that pay less in the form of dividend and instead reinvest all of the monies into a helping to flourish a company. This gives them the ability to control their capital gains, and the profit that is made from the sale of the stock.