Building Asset Allocation
When adding items to your asset allocation basket, you have to pick your resources on your vision of profits and tendency to tolerate risks.
Risk Tolerance: Your Current Financial Situation and Time you need To Culture The Investement.
Your marital status, age, and ambitions all come to play when assessing the extent of your tolerance for risks. In the context of investment portfolio, risks correlate to temporary drops in asset value, that over extended periods of time will bounce back to higher returns.
For instance, a father of 6 will naturally have a polarizing risk tolerance in comparison to a 25 year old born into generational wealth. Where one could tolerate investing in long-term growth of assets and be indifferent to short-term dentures, the former will be on edge handling these risks.