Podcast Episode 195: Understanding Risk in Your Portfolio

Today’s Wisdom:

Before you can determine an investment strategy, you have to understand your risk profile. How comfortable are you with volatility or would you prefer a more conservative approach? Unfortunately, many people just don’t realize how much risk they’re taking on inside their portfolio so that’s what we want to help you get a better grasp on today.  

Want to save time? Click the timestamps below to jump ahead to specific spots in the episode.

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What You’ll Learn:

When you begin to think about investing, one of the first words that comes to mind is risk. With every decision you make, you have to weigh the amount of risk that comes along with the opportunity for growth.

On this episode of the Money Wisdom podcast, we’re talking all about risk and how someone’s risk profile applies to our client’s retirement planning. The reason we felt the need to take on this topic for the show is because we realize most people aren’t actually comfortable with the risk they’re taking in their portfolio once we break it down for them.

What we have also seen through the years is that well over half of our clients are risk-averse. They don’t want to see a downturn at all even though they realize it happens from time to time. Given the choice, they’d rather have a smaller return that carries much less risk. And that mindset is not something an advisor can change. Trying to convince them to take on more or less risk just doesn’t work. It’s about building a plan that lines up with their comfort level.

The other side of this discussion is at some point you just don’t need to take on much risk no matter what risk profile you possess. There comes a point in your planning process that it’s more about protecting what you’ve built and we work with our clients to accomplish that and ensure a successful retirement.

Our approach to risk involves three steps, which Joel will really talk through in detail during the show:

  1. Have some of your money in a safe place
  2. Look to generate a reasonable rate of return
  3. Keep it simple

As you’ll hear during the conversation, our risk analysis comes later in the financial plan because we want to know where you’re going before we figure out how you need to get there. If you’re ready to get a full assessment of your portfolio, get in touch with us and begin your complimentary Money Map review process.

Let’s get started with the show. You can listen to it by using the audio player above and click on the timestamps to skip to a specific topic of conversation.

[0:46] – What guidance would you give Warren Buffet for his $100 billion?

[2:37] – What percentage of clients are comfortable with risk? 

[3:57] – Balancing a couple that sees risk differently 

[5:50] – How often does a portfolio line up with risk tolerance?

[8:38] – Reducing risk without reducing opportunities for growth  

[10:36] – Risk analysis we provide 

Thanks for listening to this episode. We’ll be back again next week for another show.

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Final Thoughts:

“Most people that we deal with are not risk-takers the way I would define risk-taker, which is they’re willing to make bets where they would lose everything. Sometimes hit home runs, but sometimes lose everything.”

– Joel Johnson, Money Wisdom Podcast

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