The Most Important Thing for an Investor to Know

The most important thing for an investor to know is not some bit of trivia about the stock market or the most important financial metric or the name of last year’s hottest fund manager.

Instead, the most important thing for each investor to figure out is his or her own tolerance for risk.

Risk tolerance should guide investment decision-making from the ground up and it is risk tolerance that should determine how aggressively or conservatively your portfolio is positioned.  We have a quick, easy and powerful tool for investors to find out their personal Risk Number in five minutes.

Those who invest beyond their own tolerance for risk will eventually pay a very heavy price.  Volatile markets will eventually force such investors to sell at very dicey, inopportune moments and lock in large losses.  The reality of markets is that future returns are highest from that point of maximum pessimism, and it is at this point of pessimism that many sell, taking themselves out of the markets right at the moment they are poised for exceptional future returns.

Investors that maintain portfolios within their own risk tolerance are much more likely to continue to pursue their financial goals by staying invested through both bad and good markets.  They are also much less likely to make a financially damaging and emotional decision when markets are down.

So how can you find out your own unique risk tolerance? 

It’s actually very easy and takes less than five minutes 

Our online assessment tool, Riskalyze, can determine your personal Risk Number in a matter of a few moments.

Based on a Nobel Prize-winning framework, Riskalyze helps us to mathematically pinpoint an investor’s Risk Number – an individual’s unique acceptable level of risk and reward. 

The tool is simple but powerful. Investors answer a series of questions in a short, secure, online survey and the Riskalyze patented technology generates a Risk Number between 1 and 99.  The technology takes out the subjectivity of terms like “conservative” or “aggressive” and uses quantitative methods to get to the heart of each client’s individual comfort level with risk. 

Once you know your Risk Number, you can assess your current investment portfolio to determine if it matches your risk tolerance.  Four out of 5 investors find that they are carry more risk than they realized.  In this case, you may want to make changes to your investment portfolio to more closely align it with your risk tolerance and comfort level.

Click below to find your personal Risk Number in five minutes.

 

 

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