How important is it to know your risk tolerance?

it to

Our December 4, 2017 post stated:

“Risk and return are directly proportional. The greater the risk the greater the possible return. In other words, to generate better returns we need to be seeking greater risk. The word “possible” is the operative word here.”

Each individual is unique. Knowing our risk tolerance capacity, an aspect of  “Know thyself!”,  gets us to invest in ways that allows sleep.

You can use the table below to determine your risk tolerance capacity.  When generating investment ideas, we will indicate what level of risk tolerance is most suitable.

 

1 I do not have a clear and well-defined vision of the future. 1 2 3 4 5 6 7 8 9 10 I have a clear and well-defined vision of the future.
2 I pay experts to manage my money. 1 2 3 4 5 6 7 8 9 10 I am a self-directed investor.
3 I have a low tolerance to risk. 1 2 3 4 5 6 7 8 9 10 Have a high tolerance to risk.
4 My spending needs come from portfolio income. 1 2 3 4 5 6 7 8 9 10 My spending needs come from non-portfolio income.
5 My investments are not doing as well as the market.  

1

 

2

 

3

 

4

 

5

 

6

 

7

 

8

 

9

 

10

My investments are growing with the market.
6 In declining markets I decrease exposure to the market. 1 2 3 4 5 6 7 8 9 10 In declining markets I increase exposure to the market.
7 In rising markets I buy more securities. 1 2 3 4 5 6 7 8 9 10 In rising markets I sell some of my securities.
 

8

A large cost would use 25% or more of my portfolio.  

1

 

2

 

3

 

4

 

5

 

6

 

7

 

8

 

9

 

10

Same cost would use 5% or less of my portfolio.
9 Picking stocks and timing markets can be effective. 1 2 3 4 5 6 7 8 9 10 Picking stocks and timing markets is pointless.
 

10

I am fully retired.  

1

 

2

 

3

 

4

 

5

 

6

 

7

 

8

 

9

 

10

I am 10 years or more from retirement.
 

ADD COLUMN TOTALS

 

MY SCORE ________

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The Monday Morning Millionaire Program was designed to offer compressed investment convictions. Over the last two decades, the program has outperformed over 90% of portfolios including professionally managed ones.

The program does not provide any investment advice or endorsements.

With fewer than 300 words, members can read this post in less than five minutes. Following and studying the links imbedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

 

Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me

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