Determining Your Acceptable Level of Risk

Determining your investment strategy will largely depend on your stomach for risk. Risk is the probability that you will lose the original amount you put into the investment. Notice the qualifier "original amount." As a rule, if you lose all your profits and wind up back with the original amount you invested, for investing purposes you've broken even. Although that scenario would be a pretty pathetic investment by anyone's standards, it is still better than losing everything, including the original amount invested.