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5 signs you’re being too agressive with your investments

5 signs you’re being too agressive with your investments

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.

  • While risk is necessary for rewards in investing, too much risk isn’t good. 
  • Financial planners generally suggest getting more conservative with your investments as you get older. If you don’t know your strategy or aren’t changing it with time, you might be investing too aggressively.
  • If your investing strategy relies on owning a large amount of just a few stocks, you may be invested too aggressively.  
  • Other signs include having little cash on hand in an emergency fund, and trading often.
  • Start investing today with SoFi »

Investing only works if you’re willing to take some risk. 

While it sounds counterintuitive, risk is necessary for rewards, says financial planner and Facet Wealth co-founder Brent Weiss. “You cannot get the rewards that we’re looking to achieve long-term without taking on risk,” he says. 

But, taking on too much risk isn’t helpful, either — it might make you unnecessarily anxious or leave you strapped for cash. Weiss says there are five key signs that someone’s taking on too much risk.

You don’t have any cash on hand

If you don’t have an emergency fund, you should build one before investing. According to Weiss, before taking on risk in your financial life, “you really should have a very solid foundation,” he says.

“It’s never been easier to buy stocks,” says Weiss. But just because it’s easy doesn’t mean it’s always the right move. “I see a lot of people that don’t have the emergency fund, they don’t have the positive cashflow, they haven’t protected their assets with insurance. That’s the No. 1 sign

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4 signs you’re being too conservative with your investments

4 signs you’re being too conservative with your investments

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.

  • While investing conservatively might sound good, it can actually be a risky move — your money may not get the returns you need to meet retirement or other long-term goals. 
  • If you have a large sum of cash bigger than what you need for an emergency fund, you may not be investing enough.
  • Being invested too conservatively might mean that your portfolio isn’t gaining value over several months, or moving much at all. 
  • And, if a portfolio is full of investments like bonds and money market funds, it might be too conservative and need more aggressive investments, like stocks, for a chance at higher returns in the future.
  • Start investing today with SoFi »

In investing, being too conservative isn’t as good an idea as it sounds. For investments that rely on returns to grow, like retirement savings, being invested with the right amount of risk is essential. 

“Being too conservative may actually be the riskiest thing you can do,” says CFP and Facet Wealth co-founder Brent Weiss. In his experience, the right amount of risk varies from person to person — it depends on how much risk someone can emotionally handle, how much risk your long-term plan allows for, your age, and how much risk someone really needs to take to make investments grow to their target goal.  

“The consistent way to build wealth long-term, especially for retirees to maintain their purchasing power [in retirement], is by having the risk of stocks and equities in your portfolio,” Weiss says. 

Weiss says there are three sure signs to look for

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