investment risk tolerance questions

Think back to the last three financial decisions you made. Do you think your decisions were more aggressive or conservative? Do you see a pattern?

For further consideration, take a look at these questions, which will assist in determining your level of risk. They may help you get an idea of your own risk tolerance when leading up to meeting with a financial professional.

How much investing have you done in the past?

If you have never invested a dime, even investing in Google or Apple are more aggressive moves in comparison to just putting your money in your bank account. If you have never really invested before, are very shrewd about saving, and do not commonly withdraw from the savings account, then investing in Google or Apple are more aggressive moves in comparison to just putting your money in your bank account.

A relatively conservative plan with low investment risk tolerance would allow you to continue on the retirement path you began a long time ago.

Do you have assets invested outside of your 401(k)?

Do you have investments in stocks, bonds, annuities and mutual funds that you use to harbor your money?

Once you retire you’re completely dependent upon the money in your accounts. Moreover, in retirement, there isn’t money coming into the account every two weeks, as before. Now, instead of relying on a contribution from your paycheck, all you have to rely on is your investment returns. Your perspective will reflect this: before, you were confident and not dependent on the money, and now you’re dependent upon those assets and will likely be less confident when it comes to risk.

Do you have an online trading account?

Dale Carnegie summed it up nicely when he said, “Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit at home and think about it. Go out and get busy.”

If you have gone out and gotten busy with an online trading account, then your action most likely has breed confidence and courage in your investment risk tolerance.

How much do you know about stocks and bonds?

When shopping around for investment products, there is a dizzying amount of choices. The market is full of mutual funds, which are organized and managed in a variety of ways to fit individual portfolio needs. Another major investment product, annuities, offer still more choices, with specific benefits that may be of interest. Both annuities and mutual funds are grouped investments that allow you not to have to choose each one of your stocks, bonds, real estate, etc., in your portfolio. You can consider both as a more diversified form of investing, but there are major differences.

Do you know about those differences? With knowledge comes confidence, and as such, your investment risk tolerance may call from a little more branching out.

Have you purchased real estate in addition to your home?

Real estate is an investment, and purchasing real estate in addition to your home shows that you have less investment risk aversion than an individual who chooses to store away their savings in a bank.

How much fluctuation in your accounts are you comfortable withstanding?

This is a potentially complicated question you may need professional help answering. Start out by thinking of what percentage of annual loss your portfolio can withstand over a five-year period.

We always customize portfolios to minimize risk for each individual investor. Investing in stocks is also an element, but we avoid chasing unrealistic rates of return that open our clients up to unnecessary risk. As wealth architects, it’s our responsibility not to over-accentuate the profit-side of investing to our clients. When I’m making a decision about a financial risk, I’m not going to temper my decision by thinking about returns. Instead, I’m going to think about the ability for recovery in the event of a downturn.

What is your investment risk tolerance?

Schedule an in office or over the phone consultation to discuss how Miramontes Capital can help you with your new beginning through retirement planning.