Do You Know Your Risk Number?
It's raining, it's dark and you are driving down the side of a mountain on a one lane road in Colorado. On your right is the mountain and on your side, the left, there is nothing except a sheer cliff. Your car is capable of driving 100 MPH or more, but are you going to go that fast? Of course not, you are going to watch the road (and your speedometer) and drive according to the road conditions. Your judgment is pretty easy to access when you have all the information you need right in front of you!
When it comes to investing, it's been my experience that subjective terms like "conservative" and "aggressive" are moving targets, one person's conservative investment and another person's aggressive investment might turn out to be the same investment! Subjectivity is fine but I think it is important to quantify investment risk. Like your car's instrumentation, my firm's cutting edge software can give you a current and accurate indication of the risk level you may have already assumed and the actual level with which you would be most comfortable.
I prefer to use a number that defines both your risk tolerance and your portfolio's.
My process uses my 30 years of professional experience, my investment philosophy, and cutting edge technology. That technology is called Riskalyze and in just a few minutes we can:
1. Pinpoint Your Risk Number
2. Match Your Investments With Your Personal Risk Number
3. Project Your Retirement Map
Using your own computer (or even your cell phone) my simple and intuitive questionnaire will fully analyze and help you complete understand your risk tolerance.
4 out of 5 investors have more risk than they know and often we find that an investor with a risk tolerance of say, 56, has a portfolio that projects as an 80! Our vast database not only ranks each of your holdings, it also applies a score to your entire portfolio. Wouldn't it be nice to see where you actually stand and if your holdings are in alignment with your own risk number? Riskalyze allows us to view your dividends and expense ratios as well as allowing us to easily see how reallocation affects your portfolio's risk number.
Once we look into the risk number of each item in your portfolio, we can judge the true risk and potential. Using the "Heat Map" we can see each investment's risk, potential reward, and how it correlates to the rest of your holdings. Our clients' risk number is re-evaluated daily, we always know if they are within their risk tolerance.
Next, we'll Stress Test your portfolio. Are you concerned about rising interest rates or a 2008-like market crash? What about a strong recovery, how can you potentially benefit? Riskalyze allows us to project any number of economic events into your portfolio, so on an ongoing basis we understand your potential risk and reward.
Finally, we'll chart a path to retirement using a simple plug and play visualization. Sliders let us see the likelihood of your retirement success with a multiple of variables. We'll not only know if you are assuming too much risk for retirement but also how you can adjust your portfolio to seek to minimize that risk while still pursuing your retirement projections.
When investing with an eye towards risk management, the entire conversation changes. As independent advisors our only incentive is to build a portfolio that matches your risk tolerance and then to monitor it as we go forward, there is no incentive to suggest that you take on anymore risk than you have to! If you'd like to determine your own risk number. click this button:
IMPORTANT: The projections or other information generated by Riskalyze regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Your Risk Number provided is on a scale of 1 to 99, with higher numbers indicating higher risk tolerance. Scenarios illustrated are hypothetical and not representative of any specific investment or investor. Individual results will vary. Investing is subject to risk which may involve loss of principal. No strategy assures success or protects against loss.