Every person is unique and has certain characteristics and qualities that make them who they are. In the same way, every investor has a unique tolerance regarding risk and reward that is frequently independent of age. When an advisor or financial columnist stereotypes an investor, they're not seeing or treating each person as a unique individual with their own appetite for risk. Many young investors are not "aggressive," and many older investors are not "conservative." By classifying you improperly and in generality, they are telling you that they don't really need to know you to determine how you should be invested and how much risk you are willing to accept in your investment portfolio. They are the professional, the learned and you are just a number, another client who can bring revenue to their firm.
So, how do you know you're on the right path?
First, you need to be treated as the individual you are. The role of your advisor is to turn complex data into a compelling roadmap for your future. A roadmap that is easy to understand detailing expectations of risk, performance and the probability of achieving your goals made measurable and straightforward.
Fear plays an integral role in survival, and that trait carries over into all facets of life, including investing. In my many years of experience working with people in a personal financial advisory relationship, I have discovered that we all have greater motivation to minimize losses rather than earn gains. Simply put: losses hurt worse than gains feel good.
The key is to empower investors to stay the course during the short-term, so they don't lose sight of the long-term. I believe all long-term investors are made one short-term decision at a time, which is why I use the Risk Number®. I believe that every person is unique and has a unique perspective on how they will react to volatility in the market and their investments.
The Risk Number® is an objective, quantitative measurement of an investor's true risk tolerance and the risk in a portfolio. It is a more efficient way to discuss risk with a client than subjective terms like "moderate" and "aggressive." Our Risk Number® approach uses a six-month probability range so you have an accurate expectation (within a 95% confidence level) of the range of returns your portfolio could achieve over that period. When the market dips, the Risk Number reminds a nervous client that they're still within their risk tolerance.
Equipped with a genuine Risk Number, your advisor can focus the conversation on the client's biggest fear, suffering losses. My philosophy has always been to minimize my client's losses in a down market while participating in the growth of an upmarket. This can be a delicate balancing act, and while using a core portfolio of high-quality dividend paying stocks may not be sexy for some, for most, it is reassuring to know that their actual losses will not hurt as much and a few extra points of gain feels good.
At Buckeye Wealth we combine our depth of investment knowledge, investment philosophy, and cutting-edge technology in order to empower fearless investing. We’ll take a quantitative approach to pinpointing your Risk Number by going through a series of objective exercises based on actual dollar amounts. Click the button above to find out your risk number.