An investment is “suitable” when it is consistent with your investment objectives and risk tolerance and when it is reasonable given your age, your current asset mix and your employment status. Not all unsuitable investments result in losses, nor do all suitable investments achieve gains.

For example, older investors should not make investments that carry a high degree of risk, because recovering from an investment loss will be difficult — if not impossible — given their limited ability to earn income. Similarly, younger investors with a lifetime’s worth of earnings ahead of them, can tolerate increased risk. An unsuitable investment for a younger worker is one that yields unacceptably low rates of return.

When considering whether an investment is suitable, investors should consider the rate of return they hope to obtain, the risk of loss and the liquidity of the proposed investment.

Suitability is also dependent on asset allocation. Older investors should weigh their portfolios toward low-risk investments and away from most equities. An otherwise unobjectionable investment that tips an older investor’s portfolio toward equities might not be suitable for that investor.

Finally, the “suitability” calculation changes over time. A suitable investment for a younger person might become unsuitable if the person marries, has children or loses their job. Monitoring investments for suitability over time is the responsibility of both the stockbroker and the individual investor.