Do Your Investments Match Your Risk Tolerance?

risk tolerance

When was the last time you looked at the content of your portfolio?

 

When turbulence hits Wall Street, are you stressed out? If you have taken on too much risk in your portfolio – which can happen through intention or inattention – stock market volatility may make you anxious. So from time to time, it is a good idea to review how your assets are invested. Your asset allocation should correspond to your tolerance for risk, and if it doesn’t, it should be adjusted.

A balanced portfolio may help you come out of stock market dips in better shape. Stocks and stock funds aren’t the only investment classes you can choose from, and you won’t be alone if you decide to examine other investment options.

Treasuries, bonds and bond funds become attractive to investors when Wall Street turns especially volatile. Certain forms of alternative investments gain attention as well, particularly those with low or no correlation to the equities markets. Bonds tend to maintain their strength when stocks perform poorly. Some cautious investors maintain a cash position in all stock market climates, even raging bull markets.

Downside risk can particularly sting investors who have devoted too much of their portfolios to momentum/expensive stocks. A stock with a price-earnings ratio above 20 may be particularly susceptible to downside risk.1

Underdiversification risk can also prove to be an Achilles heel. Some portfolios contain just a few stocks – in the classic example, someone has invested too heavily in company stock and a few perceived “winners.” If a large chunk of the portfolio’s assets are devoted to five or six stocks, the portfolio’s value may be impacted if shares of even one of those companies plummet. This is why it is wise to own a variety of stocks across different sectors. The same principle applies to stock funds. If the S&P 500 corrects (that is, drops 10% or more in a short interval), the possibility grows that an aggressive growth mutual fund may dive.1

 Are you retired, or retiring? If you are, this is all the more reason to review and possibly even revise your portfolio. Frequently, people approach or enter retirement with portfolios that haven’t been reviewed in years. The asset allocation that seemed wise ten years ago may be foolhardy today.

Many people in their fifties and sixties do need to accumulate more money for retirement; you may be one of them. That sentiment should not lead you to accept extreme risk in your portfolio. You’ll likely want consistent income and growth in the absence of a salary, however, and therein lies the appeal of a balanced investment approach designed to manage risk while encouraging an adequate return.

 Why not take a look into your portfolio? Ask a financial advisor to assist you. You may find that you have a mix of investments that matches your risk tolerance. Or, your portfolio may need minor or major adjustments. The right balance may help you insulate your assets to a greater degree when stock market turbulence occurs.

 

 

Citations.
1 – fc.standardandpoors.com/sites/client/wfs2/wfs/article.vm?topic=6064&siteContent=8339 [5/5/14]

 

Our Post Archives

Subscribe to our Newsletter

By subscribing to our mailing list you will always be updated with the latest news from us.  We never spam!

More Articles to Explore

gradual retirement
Retirement

The New Gradual Retirement

  Do we really want to retire at 65? Not according to the latest annual retirement survey from the Transamerica Center for Retirement Studies which

Read More »

get in touch

  • 513-791-8899
  • gwilliams@crownmail.net
  • 8160 Corporate Park Dr
    Suite 210
    Cincinnati OH 45242
  • Open in Google Maps

Weekly Newsletter

Get updates with our latest insights.  We never spam!

Stuff we have to say

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP (with flame logo)®, which it awards to individuals who successfully complete initial and ongoing certification requirements. CHARTERED RETIREMENT PLANNING COUNSELORsm and CRPC® are registered service marks of the College for Financial Planning®. DISCLAIMER: This web-site is for informational purposes only and does not constitute a solicitation or offer to sell securities in states where we are not licensed. Gary L Williams is licensed in the states of Ohio and Kentucky for securities, life insurance, and variable products. Information throughout this site, whether stock quotes, charts, articles, or any other statement or statements regarding market or other financial information, is obtained from sources which we, and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing on this web-site should be interpreted to state or imply that past results are an indication of future performance. Neither we nor our information providers shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission thereof to the user. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION POSTED ON THIS OR ANY LINKED WEB-SITE. Some material on this website prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

© 2018 Gary L Williams. All Rights Reserved.

Gary L Williams Registered Representative, Registered Investment Advisory Associate
Securities and Investment Advisory services offered through Crown Capital Securities LP 8160 Corporate Park Dr Ste 210 Cincinnati OH 45242 513-791-8899 Member FINRA, SIPC