It is important for investors to understand their risk profile before building an investment portfolio. A risk profile typically depends on a person’s age, life goals, and duration of the investment. Depending on these a person can have different risk levels.
At a young age, when retirement is decades away, investing for the golden years of life is a long-term goal and greater risk can be taken to achieve potentially higher returns or capital gains. Age gives young investors the advantage of riding out the highs and lows of the market. On the other hand, if one is nearing retirement, it is better to go for less volatile, maybe even lower-yielding assets so as to minimize the risk of any sudden dip in the total value of investments.
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