Your Goals & Your Comfort Zone
The driving force behind all of your financial decisions should be your end goal and how you want to work towards it. Whether short-term or long-term goals, saving for your child’s education or a yearly vacation, you should have a strategy in place that works for you.
After establishing your goals and their timeframes, you must determine your investing comfort zone. These are all things that LCM will help you assess, but in thinking towards these decisions, you can use this guide to determine the “type of investor” you are.
Very Conservative:
You prefer a portfolio that is less likely to fluctuate in volatile markets. You are willing to accept lower returns in exchange for a good nights sleep during a stock market downturn. You may have accumulated assets sufficient to allow you the flexibility to choose lower returns and lower volatility and still meet your income needs.
Conservative:
You prefer a cautious approach but are willing to have some exposure to short term market volatility in exchange for slightly higher potential long term gains. You may require an element of growth in your portfolio in order to meet your long term savings goals but are uncomfortable with more than a small percentage of stock market holdings.
Moderate Investor:
You understand that a diversified mix of investments, using conservative holdings to balance riskier ones will create a portfolio that will exhibit short term fluctuations. You also understand that you will likely achieve slightly higher returns over the long term. You plan to accumulate a significant level of retirement assets and realize that growth will be an important element in the process. You may be close to taking an income from your portfolio so an exposure to income producing investments for those payments would be prudent.
Aggressive Investor:
You are comfortable with stock market investments and expect your portfolio to exhibit some volatility, realizing these movements are both up and down. You are either in the process of or have already saved significant amounts allowing you the flexibility to watch short term down turns without the pressure to sell. You see short term down periods in the stock market as a buying opportunity, not a time to sell as you have the time to be patient for the next eventual upswing.
Very Aggressive Investor:
You will not likely see any benefit to holding even a small portion of your portfolio in conservative, income investments. It’s all or nothing at your stage of the game. You know your portfolio will decline, possibly significantly at times, but also see this as a buying opportunity for eventual long term gains. You may be young, with lots of time to save, or closer to retirement but with a good comfort level and experience with stock investments in order to find yourself in this category.
Not exactly sure into which category you might fall? Complete the following risk tolerance questionnaire and submit it to us. We can provide you with a brief summary of a portfolio allocation that will suit your return and volatility expectations.