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In finance, there are
different types of risk that more often than not increase in magnitude as
higher rates of return are sought. As we try to maximize results for your
portfolio, it is important that we do so within the constraints of your
tolerance for risk. Though we attain a fuller understanding of your
attitudes in person, below are some concepts you should consider when
investing. Domestic versus
international
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Are you comfortable investing
in firms based outside the U.S.? |
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If yes, are you comfortable
investing in companies outside of North America, Europe, and Japan? |
Name recognition
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Are you comfortable investing
in companies which you have never heard of beforehand? |
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If yes, does that comfort
extend to firms only a few years old? |
Losses
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Can you handle losing money
for a month? for a year? for two years in a row? |
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Though confident of long-term
gains, can you handle a temporary loss of 2% of your assets? 5%? 10%? 25%? |
Volatility
Consider the following investments:
Investment A has always returned 3% per year
Investment B has an average annual rate of return of 7%, with a best 1-year
return of 30% and a worst return of minus 30%If
these were the only choices available, how would you allocate assets
between them?
Which would you choose if you had to put all your money in only one of them?
Time horizon
Would answers to any of the above be different
for:
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Funds you are saving for
retirement |
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Money intended for a large
purchase in 5 years |
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Excess cash on hand but
needed for expenses within a year |
Click here to
learn more about risk.
Click here for
personal consultation. |
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