What is a risk assessment, and do I need one is a question we get asked often at Alloy Wealth. A risk assessment allows a fiduciary financial planner or investment manager to assess the level of risk a client is willing and able to take with regards to investing then create their risk profile. With investing comes risk, that’s why knowing how much risk a person can mentally, emotionally, and financially handle helps when building portfolios. Once we understand a client’s risk tolerance, how long they can wait before needing their invested assets, and what their personal and financial goals are, we can make sound investment recommendations.
Risk assessments are important because no two investors are alike. Some investors feel stress and anxiety when watching short-term market fluctuations therefore high-risk investments may not be the right fit for someone likely to suffer investor panic. Age plays a big factor when assessing risk. If a person has thirty plus years to go before retiring, they’ll likely be more open to taking bigger risks because they have the time to make up potential losses. On the other hand, someone within five years of retiring may want to reduce risk to preserve wealth.
Go to our website to take an online risk assessment then call 800-689-3935 to speak with one of our team members if you have questions about retirement planning, or investment management.