Know your Risk Tolerance number. It's a quantitative way to pinpoint how much risk you want, how much risk you currently have in your portfolio, and how much risk you need to take to reach your goals. Understanding your risk tolerance can help guide your investment decisions and help you sleep more soundly at night.
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Risk tolerance is a highly individual matter. A portfolio that keeps one investor awake at night may let another sleep soundly. However, investors must be willing to accept a certain risk level to receive investment returns in the form of interest or capital gains.
All investments carry a tradeoff between risk and return—generally, the higher the risk, the higher the potential return—or loss. Conversely, the lower the risk, the lower the potential return or loss. The goal is to find the right level of risk that provides the returns you need, while letting you get a good night’s rest.
Temperament, age, stage in life, investment experience, financial goals, and time horizons are all factors that affect one’s risk tolerance. Following is a brief discussion of some of these points to help you assess your own personal risk tolerance:
It is prudent to assess your risk tolerance before beginning an investment program. Then, reassess it periodically as you progress through life’s major stages, such as when starting a family, changing jobs, or approaching retirement. Understanding your risk tolerance can help guide your investment decisions, and help you sleep more soundly at night.
Follow up with a Strong Valley financial advisor to better understand the context of your unique goals and situation.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results or even estimates of actual returns a client may achieve. This information is designed to provide general information on the subjects covered. Consult your financial professional before making any investment decision. Opinions and estimates offered are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. Please see other important disclosures related to StrongValley.com
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