Here's a simple way to think about risk tolerance and a practical plan to set your first investment mix: 1) Determine your time horizon: When will you need this money? (e.g., 10, 15, or 20+ years) 2) Imagine market swings: If your portfolio dropped 15-20% in a year, would you stay invested or panic? 3) Sleep test: If a downturn would keep you up at night, lean toward less stock exposure; if you could stay calm, you can handle more stock exposure. 4) Pick a starting mix (rough guide): - Comfortable with risk: 70% stocks / 30% bonds - Moderate risk: 50% stocks / 50% bonds - Cautious: 30% stocks / 70% bonds 5) Start simple: Use a broad stock fund and a bond fund and rebalance once a year to keep the mix aligned with your target. 6) Reassess periodically: As your time horizon shrinks or your situation changes, adjust your mix. This approach helps align your investments with how you feel about risk, rather than chasing returns.

Volatility is a measure of how much an investment’s price swings up and down. Higher volatility means bigger price swings, which often come with greater potential rewards but also bigger short-term losses. Matching your portfolio’s volatility to your comfort with risk helps prevent you from panicking during market downturns.