"To thine own self be true"

thine own self

"To thine own self be true," says Polonius in Hamlet.

Self-knowledge is certainly one of the best tools you can have when working with your wealth manager to build a portfolio that works for you; and it can keep you from acting impulsively in a way that damages your long-term returns.
One’s risk tolerance changes over time.  Age, income, and circumstance all interact to form your current level of risk tolerance.  As various factors change in your life, you will find that your risk tolerance rises or falls. 
What is your current risk tolerance?  How much risk can you handle as an investor?

  • What can you afford to lose?  How much money do you have available?  And how much of it can you afford to lose?
  • What is your time frame?  The length of time remaining until you reach your goal matters when it comes to how much risk you can handle in your portfolio. Retirement is a good example.  As you approach retirement, you have a lower risk tolerance, since you don’t have decades to rebuild if a riskier investment causes problems.
  • What is your emotional ability to handle risk?  Not only does risk tolerance include your financial ability to handle a certain level of risk, but your emotional ability to deal with risk should also be considered.  If risky investments are going to stress you out to the point that it affects you in other areas of your life, that can be an issue.  It also matters if you are so risk averse that you never include investments that can grow your wealth.

Every day, every one of us makes choices and decisions in the face of uncertainty. Guided by a blend of intuition and logic, we spend a large part of our lives navigating the murky waters of chance.  Grant Statham is an alpinist, avalanche expert and internationally certified mountain guide.  In 2003, following a devastating avalanche that claimed the lives of seven high school students, Grant was hired by Parks Canada to design and implement sweeping changes to Canada's systems of public avalanche safety.  Over the next decade, Grant's study of risk theory changed an entire industry and produced numerous groundbreaking methods that today have been implemented around the world.  Please take a few minutes to view this video and consider Grant’s comments about risk -- the anatomy of chance and uncertainty.

Just as an avalanche can produce catastrophic outcomes for mountain climbers, so can a market collapse produce catastrophic consequences for investors.  But when it comes to investing, Equity Concepts is here to help you.  Using a new tool whose core technology is built on the academic framework that won the Nobel Prize for Economics in 2002, your Equity Concepts team can now align your individual investments with your individual risk tolerance. Riskalyze empowers you and your wealth manager to capture a quantitative measurement of your risk tolerance, and use that data to meet expectations and quantify suitability.
To learn more about your current risk tolerance and understand how you can move beyond a combination of gut instincts and emotionally-driven investment decisions, give us a call.
 
Kenny Elkins – 800-936-6166 or kenny@equity-concepts.com