Investing and Your Risk Profile
You walk into a bar, and find a Gorilla, a Rabbi, and Elon Musk. You elbow up to the bar rail, and the Gorilla asks, “How do you feel about the Dow?”
What would you say?
Last week’s installment introduced an example of stock market risk used by financial advisors to project their clients' investment portfolio risk. A thought put forward in the text is the comfort individuals might gain from projecting the potential highs and lows of their savings and investments. The installment ended by tying back risk control to diversification by using ETFs and mutual funds.
Diversification is a primary tenet in economics-based financial planning. New readers may be interested in knowing the risk to their wealth is best understood by learning how wealth diversification applies to them.
More informed knowledge about investment risk is the first step to making better investment choices. The second step integrates an individual or household’s taste for risk to make the best personal choices. After you go through three exercises, you will be able to provide the next Gorilla a snappy answer to the risk in the market.
Today: Three tools for you to understand your risk tolerance, including tools from Vanguard and Schwab. The PDF includes all of Chapter 6 to date.
Excerpt:
