The investment objective is not to make a lot “of money.” This idea may be surprising to many investors. Without doubt, make a fortune would be wonderful and most of us would like to have that “problem.” However, this common goal is quite vague. How much does a lot, lot, or even a boat? What do we need the money? How much is enough? What are we really trying to accomplish? Without examining these questions, we are carrying out a fantasy, not a clear objective. In finance, it is generally accepted that a relationship exists between risk and return. If you take a small risk, expects little profit. Think of money market funds that currently produce less than one percent per year. On the other hand, if you’re willing to take risks, you should be able to expect higher returns. Some bank stocks, for example, have risen over 100 percent in just the past few months. However, riskier investments to bring a wider range of possible outcomes. You may lose more money in a riskier investment, although it expects to receive a greater return in the future for the risk you have taken. Thus, the period within which you need money becomes very important. Lessons LotteryIn Somehow, with an investment of “great victory” can be compared to playing the lottery. If you go to the corner store and buy a lottery ticket, betting on the chance of hitting the jackpot, but could go with less than they entered with, as happens more often. When playing the lottery, make a conscious decision to risk losing all the money you paid for lottery tickets, hoping to beat the odds (considerable) to win. On the other hand, it is surprising to note that about 80 percent of lottery winners declare bankruptcy within five years! Maybe a lot of money is not as good as it seems. It’s part of human nature to think that more is better. However, many stories and myths to address this issue with a warning not to overreach. fairy tale # 19, The fisherman and his wife of Grimm, is one example. The fisherman catches a magic fish talk, you edit. The fish could be seen as the investment of the fishermen, his wife’s urging, is taking advantage of getting a higher return. He asks for a bigger house, then a castle, and so on. Finally, the risks fisherman too, calls for a level of profitability which is clearly unnecessary and unrealistic. The result is that the couple loses everything and ends up back to the starting point. The degree of risk can you afford? The purpose of doing a lot of money encouraged to take risks. The investments required to achieve the highest yields are generally the riskiest. Having this type of risk can not be what you want or need. Hopefully I know enough to determine how much risk you are willing to accept, but do you know how much risk you can actually afford? People tend to take much risk in stocks in their retirement accounts in an effort to maximize the possibility that these investments will grow as much as possible – i. e. , Will become the proverbial pile of money. Perhaps some investors have the temperament to stomach large swings in the value of their accounts. Many people do not. The investor makes bold risky choices thinking that has hard time to cope with patches on the market. In reality, it takes many years to recover from big successes in the value of a portfolio. As people age and accumulate some assets, generally do not want to risk losing what they have. I can not overemphasize the point that we must be in contact not only with the risk we can tolerate, but also the risk that we can afford. Risk assessment can afford depends on having a clear notion of the goal or objective of our investments. Instead of simply the objective of the juiciest returns or have to adapt our risk to a specific objective. For example, if you determine that you need about a million dollars in investments to retirement, are already close to that amount and the plan to retire in five years, no risk necessary to achieve a great return. In fact, you should be interested in protecting what has already been accumulated. While earning a return on capital is important, its preservation is so important. The role of investment risk in the PortfolioThis not mean you do not want more risky investments with high yield potential. If you need your assets to grow over time, must have some of them. Remember that the idea of the menu of “investment” introduced in last month’s newsletter. Selection of the most profitable investment risk must be done in the context of its general menu, or portfolio. Then consider the amount of risk of each investment “of course” raises a whole menu of your portfolio. For example, if you ask me, “Should not have gold?” the answer will be based not only on whether we expect the gold price to rise over time, but also the effect of adding gold to the portfolio has on your level of risk, and how to help them achieve their goals. The investment objective is a return commensurate with the risk they can tolerate and afford. The objective is to preserve precious capital, growing as needed, while at the same time manage risk. The investment starts with your preferences, goals and values. The vague goal of making a lot of money does not account for much of his personal situation. No foster discussion of risk and return, need vs. want or what they’re really trying to achieve. Most people would be happier making steady progress towards their vision of retirement, instead of taking much greater risks and potentially falling short. Nobody sets out to be like the fisherman and his wife, after years of investment, to be back to square one.