{"id":6827,"date":"2017-09-26T14:51:58","date_gmt":"2017-09-26T18:51:58","guid":{"rendered":"https:\/\/www.zacksim.com\/?p=6827"},"modified":"2022-02-26T13:15:21","modified_gmt":"2022-02-26T13:15:21","slug":"risk-tolerance-line-portfolio","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/risk-tolerance-line-portfolio\/","title":{"rendered":"Is Your Risk Tolerance In-line with Your Portfolio?"},"content":{"rendered":"

David T. from Worcester, MA asks: <\/em>Hi Mitch. I\u2019m trying to figure out how to make sure my investment portfolio is in-line with my risk tolerance. I know that I want growth, but I don\u2019t want to endure a 40% or 50% loss like in 2008. I wouldn\u2019t be able to handle it. How does Zacks measure risk and give investment advice to clients based on their risk tolerance?<\/p>\n

Mitch\u2019s Response: <\/strong>That\u2019s a very interesting question, David, and one that\u2019s debated often in the investment community. How does one actually define \u201crisk tolerance,\u201d when doing so means trying to box-in a highly subjective concept? You could easily argue that no two investors fall exactly in the same place when it comes to risk. People\u2019s feelings about gains, losses, and volatility are often wildly different depending on their past experiences and future expectations.<\/p>\n

Yet, many financial advisors still just default to generic questionnaires to determine how \u201caggressive\u201d or \u201cconservative\u201d someone should be. At Zacks Investment Management, we go beyond \u201ccookie cutter\u201d investment advice and provide a customized analysis for every client, then use our independent market research and tools we\u2019ve developed to design a customize investment portfolio based on your individual needs.<\/p>\n

We believe that our best tool for gauging risk tolerance is to listen to our clients as much as we can as we go through the investment process. Ultimately, the client will inform us if a portfolio outcome is perhaps too volatile or aggressive or not aggressive enough. The open lines of communication we try to maintain with our clients help us collect data throughout the relationship to inform us how \u2018comfortable\u2019 the client is with their asset allocation and our approach. Adjustments can be made as needed.<\/p>\n

But at the same time, it is also our job as Wealth Managers and Portfolio Managers to educate our clients<\/em> on what we believe is the optimal asset allocation given their long-term growth objectives and based on the standard of living they want in retirement. In many cases, that means recommending a significant percentage of the portfolio\u2019s asset allocation to stocks, which may push a client to their boundaries for the amount of equity-risk they\u2019re comfortable having.<\/p>\n

All too often in the investment industry, we see advisors who might recommend overly conservative investments to risk-averse clients, since those investments aren\u2019t likely to inflict significant losses during periods of decline in the markets. In other words, a strategy is recommended that might make the client feel good, but won\u2019t ultimately produce the growth needed to help the client actually realize their long-term goals. In our view, it is riskier in this case NOT to recommend the riskier investments that offer better chances for substantial gains over time.<\/p>\n

The opposite can also be true. There may be some clients whose positive experiences in the markets lead to overconfidence, and\/or aspirations for extravagance may lead them to speculative investments or overexposure to equities. These allocation decisions may put them at too high of a risk of large losses, which would also compromise their ability to meet a long-term objective.<\/p>\n

There is a delicate balance to be found with each client, and again our goal is to listen as much as possible to help our clients land in the right place.<\/p>\n

Finding the right balance and understanding your particular financial situation takes times as you look at your long-term goals, your investment time horizon, risk tolerance and other factors. This can be a difficult process to navigate on your own. So, to help you get a head start, I would recommend referring to our guide, \u201c4 Steps to Managing Your Retirement Assets.\u201d This guide offers insight to help you make critical decisions about your retirement and outlines four simple steps that can give you an added advantage when you retire. \u00a0Download your free copy today by clicking on the link below.<\/p>\n","protected":false},"excerpt":{"rendered":"

David T. from Worcester, MA asks: Hi Mitch. I\u2019m trying to figure out how to make sure my investment portfolio […]<\/p>\n","protected":false},"author":1,"featured_media":7436,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-6827","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/6827","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=6827"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/6827\/revisions"}],"predecessor-version":[{"id":10941,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/6827\/revisions\/10941"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=6827"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=6827"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=6827"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}