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What You Must Know About Taking Risks in Your 30s
Money Management

What You Must Know About Taking Risks in Your 30s

As you become more financially stable in your 30s, one thing becomes apparent — you need to find ways to advance career-wise, build wealth, and create a strategy to protect yourself financially. 

With many financial goals to accomplish, from educating your kids, and owning a home to planning for retirement, you need a framework for increasing your income and building your wealth. To achieve that, you'll need to take some risks. 

With time still on your side, the 30s can be the perfect decade to take risks. They're the years to advance your career and employability by taking a postgraduate degree or sharpening your skills. The years to solidify your foundation and step into unfamiliar territories outside your comfort zone, invest more, and set yourself on a path to financial security.

But without enough financial mastery, the 30s can set you up for financial ruin when you take more risks than you can tolerate. 

So how do you protect yourself? This article will dive into what risk-taking is and everything about it, explore why you should take risks, and discuss factors to consider.

Read Also: How to Get More Out of the Money You Have in Your 30s

What is Risk-taking?

Risk-taking is defined as any intentional or unintentional financial act with a presumed uncertainty about the result that you undertake. When you take a risk, you are unsure about the outcome. It can either be positive (i.e., you benefit) or negative (i.e., it costs you.)

Any financial move you make to benefit yourself, whether it's investing your money or investing in yourself, can be considered risk-taking. This is why you must understand your risk profile to minimise losses and manage the risks you take.

Understanding your risk profile involves evaluating your willingness and ability to take risks. The first step to creating your risk profile should be to assess your financial health, balance your assets and liabilities (risk capital), and devise a plan on how you will take risks and minimise/avoid losses. 

Apart from your financial standing, your age, responsibilities, goals, and time horizon will determine your risk profile. To prepare your risk profile, you must first know your:

Risk Capacity: This is the amount of risk you are able to take, accept, and support to achieve your financial goal. Your risk capacity will also determine the kind of risks you undertake. A person with high-risk capacity will likely invest in more high risk assets.

The main factors that will help you determine your risk capacity are time horizon, current resources, and future incomes and expenses.

Risk Appetite: This refers to the amount and type of risks you are willing to take to reach your financial goals. Your risk capacity and your financial goals will determine your risk appetite. 

If you are able and willing to invest in high-risk vehicles to accomplish a significant financial goal, that can be defined as having a high risk appetite.

Risk Attitude: This can be defined as your chosen approach and response to risks. Your age and experience will play a significant role in determining your risk attitude.

There are three types of risk attitudes. 

  1. Risk-seekers - People who welcome and enjoy risks, 
  2. Risk-neutral - Individuals who tolerate risks subjectively and are calculative, 
  3. And risk-averse - Those who avoid uncertainties and don't like taking risks.

Risk Tolerance: This refers to the levels of risk you are willing to accept and the degree of volatility you are prepared to withstand to achieve your objective. It is the most important thing to pay attention to when preparing your risk profile. Without understanding your tolerance, you risk driving yourself to financial ruin.

Your age, risk attitude, capital, net worth, risk you are considering, and most importantly, your financial goals are the main factors that will help you determine your risk tolerance. Your current assets and future incomes will also impact your assessment.

Your risk tolerance will significantly determine how you balance your risk capital and how you save and invest for your financial goals. 

Also Read: Investment and Risk-Taking Lessons from The Crypto Crisis

Types of Risks

Every financial action you take, whether in saving or investing, carries risks. Various matters will determine the type of risks you'll be exposed to. Risks are classified into:

Systematic Risks: These are types of risks that are caused by different external factors you have no control over. You cannot quickly minimise, or manage them when they happen. When they occur, systematic risks can affect entire markets. 

Examples of such risks include political, social, environmental, and economic risks such as interest rates, inflation, recession, etc.

Unsystematic Risks: These are industry-specific types of risks caused by internal factors. They can be controlled, minimised, and to some extent, averted. They only impact a specific industry or organisation when they occur.

Unsystematic risks include financial and business risks caused by high operating and overhead costs, competitors, regulatory changes, default risks, and counterparty risks.

Minimising Risks When Investing 

Investing is one of the riskiest financial actions you can take. It's essential if you are to grow your money and wealth while shaking off the effects of inflation and the reducing purchasing power of your currency. To achieve your objectives, you must have a clear plan on how you can control, minimise, and avert risks. And at the same time, maximise returns.

One of the most common ways investors manage risks and protect their wealth is through asset allocation and investment diversification. Adopting such a strategy can lower your risk exposure, maximise your return on investments in the long term, and ensure you accomplish your goals. This practice can also allow you to balance your portfolio and help you not exceed your risk capacity.

Read Also: Strategic Financial Planning: A Guide to Planning Your Future

Asset Allocation

This refers to the process of splitting an investment portfolio into various asset groups and investment vehicles. The groups can be liquid investments (Cash, Money Market Funds, Treasury bilsl, and bonds) and illiquid investments (real estate, private company shares, and debt instruments). 

The two main factors that will influence how you allocate your assets are your time horizon and risk tolerance. If you have a low-risk tolerance with a lengthy time frame, you will distribute your assets to low-risk and long-term investment vehicles.

You lower your risk exposure by dividing your portfolio into different asset groups. For example, when one asset underperforms and brings you losses, other assets might give you profit to cancel out the loss. If you invest in one asset and it fails to provide a positive return, you risk losing your capital and investment value.


Diversification is often confused with asset allocation. Where asset allocation lets you divide investments into different groups, diversifications allow you to divide your investments in a particular group further. This will enable you to minimise your risks within an asset group.

For example, if you’ve allocated 20% of your investment to stocks of five companies, how would you protect your investment should those companies' stocks crash? By diversifying the stocks, you hold. 

Instead of buying the stocks of a handful of companies, diversification is about purchasing stocks from tens or hundreds of companies from different industries. You will be protected when the stocks of companies from one industry are underperforming.

Diversification can be almost impossible when you have little capital. Buying tens of stocks from various companies and keeping up with them can be tricky. You can look into investing in vehicles that pool funds from different investors to invest in multiple vehicles. These can be mutual funds, unit trust funds, and SACCOS, among others.

Portfolio Rebalancing

Once you have allocated your assets and invested to align with your risk tolerance and objectives, they will likely diverge from your original plan after a certain period of fluctuations. 

Some assets might grow in value, and others lose value. When that happens, you will have to revisit your portfolio and return it to its original form. That is portfolio rebalancing.

Portfolio rebalancing allows you to stay within your risk capacity and prevents exposing you to more risks than you are willing to accept.

Risk Tolerance and Asset Allocation 

Your risk tolerance will shape how you allocate your assets and invest your income. When you make any investment, you assume some degree of risk. Investments with higher returns are typically high risk, and investments of low returns are generally safer. 

Before you invest and allocate your assets, you need to figure out your risk tolerance. Here are factors to help you:

Risk Capacity: How much risk are you able to take? This should be defined by your financial health, expenses, and budget. If you are a person with much responsibility and less income, your risk tolerance might be low. But it might increase as your income increases, you gain experience and redefine your financial goals. 

Age: As you age, your risk tolerance will change. In your 20s, you theoretically had the highest risk tolerance. You had less income and were just learning how to get the best out of your money. In your 30s, it's different. You have more income, but also more responsibilities, better defined goals, and are focused on the future. You might reap from risk-taking.

Your risk tolerance levels will likely reduce as you enter the 40s, 50s, and nearing retirement. You’ll constantly have to rebalance your portfolio to reflect that. You'll want to allocate your money to assets that will generate you income and provide some guarantee that the initial investment will be intact.

Financial Goals: Your financial goals and how quickly you want to achieve them will determine your risk tolerance level. A 28-year-old planning to buy a car within two years might spread his investments in high-risk vehicles. Meanwhile, a 32-year-old who wants to save for their kid's college tuition might take the opposite approach and lower their risk tolerance.

Read Also: 10 Long-term Financial Goals to Start Today 

Merging Risk Tolerance with Investment Strategy 

As an investor, you must consider returns and the risks your investment will bear. Without that, you cannot develop a strategy to meet your goals. 

When assessing risks, it's crucial that you stay true to yourself and don't exaggerate your risk tolerance. Being overly safe might lead to low returns, and being overconfident at the beginning, might force you to react emotionally to volatility later.

There are generally three types of risk tolerance, but between each, you can create a subcategory. Some people might not fit a profile entirely and will be in a grey area between two conflicting levels. 

Conservative Risk Tolerance: This investor will allocate their assets and investments with the primary goal of preserving and conserving their initial principle. They invest in vehicles with little volatility and are comfortable with minimal returns. 

The portfolio might include cash or cash equivalents like MMFs, and fixed deposits, among others. Their investments might help them generate little income that can hedge against inflation.

Such investors typically have a short-term goal to achieve, are retired or approaching retirement, or saving for important goals with little room for risks.

Moderate Risk Tolerance: This investor will allocate their assets and invest their money in somewhat risky vehicles. They are willing to incur certain risks for a reasonable return. Their portfolio might include both high-risk and low-risk assets evenly balanced. The investments might generate income or appreciate and realise capital gains.

An investor with moderate risk tolerance generally has short and medium-term goals to achieve. These goals can include educating their kids or saving for big purchases. 

Aggressive Risk Tolerance: This investor will allocate assets and investments in high-risk and volatile vehicles. They are comfortable with losing large chunks of their initial investment in the quest for the maximum return possible. Their portfolio will include instruments such as cryptocurrencies, international stocks, bonds, small-cap stocks, etc. They favour capital appreciation over income generation.

Investors with aggressive risk tolerance are typically young or experienced and have a high risk appetite. They are usually ready to withstand all market volatility and different risks and generally invest for long-term financial goals such as homeownership and retirement. 

Read Also: How To Turn Your Savings Into Investments

Why You Should Take Risks in Your 30s

Experience: You have earned your stripes after experimentation, failure, and success in your 20s, taking risks. In your 30s, You are likely more stable, know your risk tolerance, and have gained enough financial knowledge. You can build on your experience and take more calculated risks to help you build wealth.

Extra Cash: In your 30s, you are making more money, which will likely increase as you age and advance in your career. Your risk capacity has probably increased. You can afford to invest in more than one or two vehicles. You can allocate your assets and diversify your portfolio according to your risk tolerance. This will ensure you grow your money and achieve your goals within stipulated time horizons.

Time: While you might have to pick up a few more responsibilities at work and outside, you still have time to take risks. You have decades ahead of you to work, learn and unlearn. 

  • You have time to bounce back from risks that don't materialise
  • You have time to pursue passion projects and turn them into income-generating ventures
  • You have time to take career risks to increase your income, sharpen your skills and improve your employability. 
  • Starting early allows you to take advantage of the magic of compound interest and realise higher ROI
  • Starting early allows you time to ride out market volatility. 

No risks, No rewards: While you could allocate your assets to less risky investments and preserve their value, this can hurt you in the long run. You want more returns when saving/investing for long-term goals like retirement. By starting to take risks in your 30s, you can withstand volatility and rebalance your portfolio as you age and your risk tolerance changes. 

Risks and rewards go hand in hand. You could make more money by investing in high-risk instruments, but you could also lose all your capital and sometimes find yourself in debt. Always do due diligence and talk to financial experts when taking risks.

Network: By taking career risks in your 30s, you afford yourself time to build your network. This can play a big part in ensuring you are exposed to more opportunities, develop your career further, and gain industry footing. 

Read Also: Investing for Beginners: How to Get Started

Factors to Consider When Taking Risks

Cash Flow: Your current and future income and expenses should help you decide how much to risk. When Taking risks, you should be confident that your lifestyle won't be affected. A good way to keep yourself prepared when taking any risks is to have an emergency fund. In the event that it blows back in your face, you'll have something to fall back to. 

Responsibilities: How much you have on your plate should help you decide the kinds of risks to take. In your 30s, you'll start getting more responsibilities at work, and if you have started a family, they'll also be demanding your attention. Back home, you may have to support your ageing parents too. The risks you take should ensure you have the time to keep up with all this and the funds to support your dependents. 

Read Also: Supporting Your Parents Financially: 5 Steps to Take

Future: The outcomes of your risks have the potential to affect your future. You should have a framework for dealing with them when they arise. For instance, if you choose to quit your job, you might want to do that amicably and not burn any bridges. You should also prepare for future disruptions like loss of income by getting adequate insurance and diversifying your sources of income.

Debt: When you have obligations to meet, the level of risks you assume should be minimal. You should allocate your assets and invest in a way that your capital won't be lost. The wisdom behind this is to prevent you from defaulting on your loans, which in itself can expose you to higher risks like repossession of your assets. 

Read Also: Good Debt Vs Bad Debt: How to Tell the Difference 

Career: Before taking risks, you should question how stable you are in your career, industry, and employment. Is there any chance your skills could become redundant, your industry obsolete, or your company could close shop? These will help you decide the career risks to take, whether you upgrade your skills, learn entirely new skills, or find a new job before disaster strikes.

Read Also: What to Do If You Lose Your Income Mid-Career?


Risks are everywhere. You can never really be certain about the outcomes of any action you take to better yourself financially. It is the degree of the blowback that varies. Some risks have the potential to expose you to financial ruin. Some you can easily bounce back from. Some leave you unscathed. And others can incredibly transform your life.

How you approach every risk and how well you are prepared to endure the uncertainties should guide you on how to allocate and diversify your assets. You should have a strategy of how you will mitigate and control risk. Assess your risk tolerance, and only take risks you are willing to accept.

Before you take any risks, always do your due diligence and don't follow the masses for fear of missing out. Make an effort to learn the ins and outs of an investment product before buying into it. And when taking career risks, always be careful and calculated. 

Being financially aware can also help you take more calculative risks. You can invest in being more financially literate. Learning about different investments, comparing them, and only allocating your assets in a manner you are confident about will help you take risks smartly. And most importantly, always make an effort to consult your financial planner to help you assess your risk tolerance and advise you on how to invest your resources.

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Farah Nurow is an experienced Content Writer who enjoys writing creative and educative articles meant to provoke readers' thoughts. He loves sunny weather and thick books. You can connect with him on LinkedIn.

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