Today’s topic is risk profiling for your portfolio.This is a very personal component of your investment experience. Your risk preferences are likely different than mine, or your neighbors, your colleagues, or your spouse.It’s really like a fingerprint for your investment process.
So let’s focus on the three risk components of risk:
- Risk capacity: can you handle it? Bear market
- Risk need: Do you actually need to take the risk? If you are worth $10m, but spend $200k, you likely don’t need to take much risk. If you are just starting out and are planning for retirement, you might need to assume certain risks to get to your goals.
- Risk tolerance: What is your general feeling towards risk? Some investors are tolerant of risk. Others are quite averse. Putting those pieces together and overlaying them with your asset allocation is a great first step.
Of course this is an important topic for you and it requires more than a one minute video and a website. For more financial insight, please subscribe to the right. Thanks for watching.