The degree to which you tolerate risk in your financial investments determines the path taken to achieve your financial goals. It is also an important factor to consider when choosing your investment advisor.
of The Wall Street Journal warns, "Don't wait for the next crisis to hit. Now is the time to get a handle on your tolerance for risk and be sure that your retirement accounts are invested in a way you will be able to live with in good times and bad." Investopedia cites factors affecting risk tolerance as well: "the time horizon you have to invest, your future earning capacity, and the presence of other assets such as a home, pension, Social Security or an inheritance." U.S. News & World Report-Money offers several posts, one of the many pointing out that "risk tolerance changes over time. Age, income, and circumstance all interact to form your current level of risk tolerance."
Morgan Housel of The Collaborative Fund and contributor to The Motley Fool stated during his keynote address at the 2016 NAU-The W. A. Franke College of Business' Economic Outlook Conference that "your risk tolerance is heavily influenced by where you live, what culture you grew up in, what your neighbors are worried about, what your parents were worried about."
By way of example, he explains: "If you grew up in the Great Depression you are half as likely to invest in stocks compared to those growing up in the 1960s at the same point in their life. If you grew up in the 1970s, you were one-third as likely to invest in bonds compared to those growing up in the 1950s. If you grew up in the 1980s, you were more likely to buy stocks then those who grew up in the 1970s."
Is there such a thing as too little risk? Matthew Frankel of The Motley Fool warns that "Even if you consider yourself to have no risk tolerance whatsoever, the best move is not to simply stick your money in a savings account – inflation alone will erode your purchasing power."
When seeking financial advisors, you need to have confidence that they will perform in a way that aligns with your ability to accept risk. Do Four Peaks Wealth Management (FPWM)'s investment strategies play into your level of risk tolerance?
FPWM's investment approach is derived from the combined talents of professionals with more than 100 years of experience on Wall Street. This has positioned us to:
- assemble quality investments in a diversified portfolio that provides steady growth and lower risk to volatile swings over the long term;
- as fiduciary advisors, we provide quality investment advice with a focus on expense control including lower fees;
- have a long-term focus to remove emotion from decision making; and
- tailor our investment strategies to YOUR risk tolerance.
We believe in our strategies; we invest our personal savings the same way we do our client's money.
Uncertainty in the stock market plays into your risk tolerance. But volatility in the market is a natural byproduct for this type of investment. Is there a way to minimize the impact it has on your ability to tolerate risk?
Housel says, "The key for having a good experience investing is having a big gap between what COULD happen and what you NEED to happen. In finance, it's called the Margin of Safety."
Let FPWM help you determine your Margin of Safety so that you can sleep soundly at night.