READ: Kevin Simpson Discusses How to know if you’re taking too much risk with your investments

Building your investment portfolio is dependent on your ability and willingness to take on risk.

The more you’re willing to take, the higher your potential returns … and losses. Your risk tolerance depends on your risk capacity and your risk willingness, and is affected by age, stage in life, and goals.

If you’re investing for retirement and are 45 years old, you have more time to grow your money and can take on more risk than a 65-year-old can. With 30 years to build a nest egg, your investments have more time to ride out short-term fluctuations with the hope of receiving a greater long-term return.