Have you ever been on a road trip with a GPS or map app that lost its
signal, leaving you feeling a bit lost and unsure about your next turn? Well, imagine your investment journey as that road trip and resetting your risk levels, just like the GPS recalculating your route. Relying on your map can help ensure you reach your destination safely. Resetting your risk levels can get you to your financial goals smoothly and on schedule.
So, what does it mean to reset your risk levels, and why is it essential to your investment journey? Having a few risk assessment techniques and risk control measures is like keeping that good old reliable paper map in the glove box…just in case. Also, take some time to investigate other
investment vehicles and strategies; it is a great way to keep an eye on the ever-changing investment landscape.
Understanding Risk Levels and the Importance of Resetting
Think of your investment portfolio as a big apple pie and risk as a slice of
that pie. The size of that risky slice depends on how much you are willing to give away - or expose to possible loss. It also depends on your evolving appetite to participate in what may suddenly feel like risky business.
Why Resetting Risk Levels Matters
- Life Changes: Just as you might change your travel plans due to
unforeseen circumstances, life events like marriage, buying a home,
divorce, or retirement can alter your financial goals. Resetting your
risk levels ensures your investments align with your current life stage
and your long-term goals.
- Market Volatility: Remember the thrill of riding a roller coaster for the
first time? The feeling of flying fast and high and then that massive
burst of adrenaline was new and exciting. It could be that your
opinion of riding the roller coaster hasn’t changed, or like many - you
don’t like that feeling anymore, or it hurts your back a little. Maybe
it’s a “been there, done that!” and you are good just watching from the safety of the solid ground. If the stock market volatility makes your stomach drop, it might be time to reset your risk levels to a more comfortable setting. That way, you’re less likely to lose sleep over market loops and dips.
- Balance and Diversification: Resetting your risk levels can involve
having more than one type of that pie we discussed earlier. Instead of one big apple pie, you can have various sizes of pies that are not just apple. Diversification involves spreading your investments across
different assets or flavors of pie - helping you risk a little bit less of the pecan or protecting more of that pumpkin while avoiding
overexposure to just one type of investment.
See - A Data-Driven Approach: Taking the Emotion Out of Investing
How to Reset Your Risk Tolerance Levels
- Assess your Goals - or reassess them. Knowing your financial goals is
like holding a treasure map - X marks the spot, but you may need to
learn the best way to get there. Knowing your destination might
change a few times in your lifetime, it’s always good to check in with
yourself and find a financial manager who can help you route your
course.
- Evaluate your Comfort Zone - imagine you are back on that
rollercoaster. How much are you still loving it? You might enjoy
riding on that highway to the danger zone. But, if market swings are
making you queasy, dial down the risk.
- Consult with a Guide - Finding a good financial manager with
excellent risk control measures and techniques is like going on a trip
with a well-seasoned traveler. They can help you find the right path
and keep you on it. They can also help you drive or just hold the map.
Traveling with a partner is often safer and a lot more fun.
Fine-tuning your investment journey will ensure your portfolio aligns with your financial goals. Life changes, and so should your risk levels. The economic landscape is everchanging and full of peaks and valleys. If you are feeling a bit lost on your investment journey, find a manager who thrives in volatility and can help you plan the best route to reach your goals. It might just turn out to be a smooth ride.
Vineyard Global Advisors offers 12 fee-only, actively managed, including
hedged and long-only investment strategies via separately managed
accounts - Learn More
