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What's Your Number? 


March 2012

     On a scale of 1-10, if 1 is a conservative investor and 10 is very aggressive, how would you rate yourself?  Be careful though…sometimes what you think, may not be reality.

     I recently had a client tell me “David, I’m getting older now.  I’m at a point in my life that I really don’t want to lose principle in my financial portfolio. On a scale of 1-10, I’d say I’m a 7.”

     I explained to him that a 7 represents a portfolio set up for growth and most-likely, a strong amount of volatility.  Therefore, if he is concerned about losing principle, seeing the value of his account fluctuate, the way a growth portfolio typically will, might create some unnecessary angst in his life.  He said, “You’re right David, make me a 3.”

     Since money works into almost every aspect of our lives, to keep life smooth, it is critical to make sure that our investments match up properly to our risk tolerance.  A popular term “risk tolerance” but I prefer another term, “volatility tolerance;” how much volatility of principle, a person can take, so they don’t enter the “worry zone.” There is a lot of uncertainty within the financial markets at this time and uncertainty breeds a lot of worry about the future. People want to know if they are on the right track. In an Employee Benefit Research Institute poll done last year, 70% of investors over 55 years of age and older, were “not very confident” they would have enough money for basic expenses during retirement, while only 15% of investors expected to have enough money to live comfortably.

     In my experience, if a person’s portfolio is set up incorrectly, they will worry about it unnecessarily.  It’s one thing to be frustrated over the value of your account being down; however, it’s another thing to be worried about it.  Worry is a feeling that will take away from your precious time in life.  When you are worried, you might stop doing the things you enjoy.  My advice to avoid worrying about your investments is to make sure you understand how much volatility you can withstand, as well as how much volatility your portfolio might go through.  Equally important is having a sell discipline to protect your downside.  You have to recognize when it is time to move on to a new opportunity.   

     Be sure to work out these critical parameters with your financial advisor, so you can go through the ups and downs of the market with a smile on your face.


[1] Age Comparisons Among Workers, Retirement Confidence Survey,  (2011).


Disclosure: Securities offered through vFinance Investments, Inc., Member FINRA/SIPC. The Child Group Wealth Management advisors are registered with National Asset Management, Inc., a SEC Registered Investment Advisor and affiliate of vFinance Investments, Inc., Accounts are carried by National Financial Services LLC, Member NYSE/SIPC, a Fidelity Investments company. National Asset Management and vFinance Investments are not affiliated with the Child Group Wealth Management.

There are risks involved with investing, including loss of principal. Past performance does not guarantee future results.

© Child Group Wealth Management 2012


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