Did You Lose Your Shirt in the Markets Today?

When markets become volatile, your portfolio may start making large unpleasant moves just enough to cost you a good night's sleep. Sometimes, the jitters may be enough for you to lose your shirt.

How can you build defenses against such a predicament? One way is to measure your risk tolerance and to know your financial goals.

Why measure risk tolerance?

Once I met a lady in her 50's. She was very upset that day. A small market correction had made a 10% dent in her portfolio and she feared she would not make her retirement goal in the next 10 years.

She was very upset with her financial advisor that he let that happen to her portfolio.

I did a quick back of the envelope calculation to show her that she only had to allocate a small fraction of her portfolio to the equity markets to get to her retirement goal. She could keep the rest of her assets in a more stable bond portfolio.

If her advisor had done just that, her portfolio would have fluctuated less than 2% and she would have slept better at night.

Measuring your tolerance to risk allows the advisor to adjust your exposure to the stock market so you can sleep well while remaining on track to reach your retirement goals.

Talk with your financial advisor or book a time with us to know your risk tolerance.