What do investors want? High growth with little risk of loss. There’s humor in that because we know that to achieve higher rates of return, you have to accept higher risks of loss.
Everyone has three risks in their financial picture: The risk their current investments have; the risk they are comfortable taking; and the risk they need to take to achieve their goals.
Years ago risk was categorized, i.e. conservative, moderate, aggressive. Everence now uses technology to measure risk and assign it a number from 1-99.
A savings account that is FDIC insured scores a 1. Cryptocurrency likely scores in the 90s – high risk of loss. While an investment portfolio that scores 28 may be comfortable, it may not produce enough growth or income to meet one’s goals.
If your portfolio scores 71 and your personal risk score is 58, technology now can help determine what changes can be made to the portfolio to align the portfolio risk with your risk number.
How much risk should you be taking? While everyone’s situation is unique to them, there are some general principals.
The longer you can leave money invested, the more risk you probably can take. Do not put money that you cannot afford to lose at risk. Diversifying your investments can reduce risk.
Managing risk is an important piece of your financial plan. When is the last time you actually assessed the risk that exists in your own plan?