Individuals we speak with often classify their investment risk tolerance with adjectives such as “Conservative”, “Moderate”, or “Aggressive”. These self-classifications can be highly subjective and may not correctly capture the amount of risk someone is actually comfortable taking.
One Moderate investor may feel uncomfortable if their portfolio fell 5% while another may not feel uncomfortable until their portfolio falls more than 10%. Unfortunately, only discovering their true tolerance risk after a downward movement in their investment portfolio is too late.
Additionally, while many investors understand that the purpose of taking risk is to achieve investment returns, they may not have a realistic sense of how much risk is required to achieve a targeted level of return. In this case, they may not be taking enough risk and wondering why they are not able to achieve the returns they want.
We work with our clients to quantify the risk they are willing to take and balance it with the investment objectives they are seeking to achieve. By establishing a quantitative risk level, we can then use it to make necessary portfolio adjustments.
If you are unsure of your investment risk tolerance or if the investment risk in your current portfolio is appropriate for your risk tolerance, we invite you to take our complimentary investment risk questionnaire. You’ll answer some brief questions and identify your “Risk Number” that can be used as a starting point to determine if your current investment strategy is appropriate for your risk tolerance.
You can start the questionnaire here: INVESTMENT RISK QUESTIONNAIRE0