Risk tolerance is a buzzword you’ve probably heard, but it’s important to understand what it means to you. Discover your level of risk tolerance.
(Click the featured times below to jump forward in the episode)
- [2:13] – In The News: Sears Stock Trading Below A Dollar.
- [9:00] – Mailbag: Phil can’t get his wife engaged in financial planning. He wants to know whether he needs to get her involved.
[10:07] – Get Your Spouse Involved In The Planning Process.
- It’s not uncommon we have couples come in who have designated one spouse the manager of the finances. While it’s fine to have one spouse manage the day-to-day budget, you both really need to know what’s happening with your money. After all, if one spouse dies, the other is going to have to fend for themselves financially.
[18:00] – Teach Your Children About Their Finances.
- Financial literacy starts in the home. Educate your children about the basics of investing, and show them how to develop a budget.
[20:13] – What Is Risk Tolerance?
- Risk tolerance is the amount of volatility you’re willing to withstand in your investments. Essentially, you’re rating your level of comfort with the Wall Street roller coaster. Portfolios can be built with any number of risky or safe investments. Assess how much risk you’re willing to take on.
[22:47] – Are You Comfortable With Paper Losses?
- If you’re in a risky portfolio, you could stand to lose a lot of money in a financial crisis. However, as long as your money is in the market, your gains and losses are only on paper. They don’t become reality until you sell. If you’re comfortable with a “paper loss,” then you could stand to gain. Markets eventually rebound, but it takes time, and there’s usually a bumpy ride along the way.
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