When determining your portfolio allocation, it's important to understand the difference between risk tolerance and risk capacity. A risk analysis will help you establish your acceptable levels of risk.
Traditional risk analysis uses a series of subjective questions to determine your risk score. Unfortunately, when the questionnaire uses age as one of the inputs it may improperly develop your score. Age is certainly important in determining elements of portfolio construction such as liquidity or income needs. Our experience has taught us that youth does not necessarily dictate an aggressive financial strategy and conservative portfolios are not just for the mature investor.
Riskalyze uses mathematics and statistics to help you visually see the potential consequences of up and down exposures to possible portfolios.
Greater risk is generally more acceptable to investors in a strong market, but when the markets reverse, most people are less willing to be exposed to the same level of downside risk.
Riskalyze is not a market timing strategy.
- It is a tool to help investors understand the potential upside to possible downside exposures.
- It provides an accurate risk assessment--which can be vital when constructing proper allocation strategies.
- It helps investors create an effective alternative to the buy-and-hope strategy.
- It helps investors determine which buy and sell disciplines to consider.
With your risk tolerance analysis we believe it is important for your advisor to explain your risk capacity.
CALCULATE YOUR RISK
Once you have your number, let's talk about how we build portfolios to match your risk.
Investing involves risk including loss of principal. No strategy, including asset allocation, assures success or protects against loss.