SECTION III: INVESTMENT PRINCIPLES

Understanding Key Investment Principles

Registered Representatives must have an understanding of how investments work and how key investment principles will guide them along the way when selecting investments for their customers. Below are definitions to key investment principles that are used in discussions about investments:

RISK TOLERANCE

According to Investopedia, risk tolerance is "the degree of uncertainty that an investor can handle in regard to a negative change in the value of his or her portfolio. An investor's risk tolerance varies according to age, income requirements, financial goals, etc. For example, a 70-year-old retired widow will generally have a lower risk tolerance than a single 30-year-old executive, who generally has a longer time frame to make up for any losses she may incur on her portfolio."

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