Understanding My Score
A Customized Solution
Every investor has a unique set of circumstances that makes it difficult to find a pre-packed solution. As you go through your financial journey, your needs will change. The key to long-term financial success is allocating your assets to the portfolio that best suits YOUR individual needs.
Your Risk Score is determined in two steps:
Step 1: Determine Your Time Horizon
Investing involves risk. Risk is essentially the volatility of returns during the time it is invested. While over the long-run an investment may have superior returns, over short periods of time the returns may be negative. The shorter the time horizon, the less risk a portfolio should have. Keep in mind different portfolios may have different time horizons based on the purpose of the funds. For investors taking income from their portfolio, separating the income portion into its own portfolio is a popular strategy.
Step 2: Determine Your Risk Tolerance
Risk tolerance is generally thought of how much risk an investor is WILLING to take. This is certainly an important determinant, but it is typically driven by EMOTIONS. Typically investor feelings toward risk fluctuate with the direction of the market. The more important determinant is the ABILITY to take risk. The ability to take risk is determined by data, not emotions. While time horizon is one portion of a portfolio's ability to take on risk, other determinants are based on the individual situation.
There are numerous questionnaires available to determine the WILLINGNESS to take risk. Tolerisk looks closer at your risk personality and then your overall financial situation to help you determine your ABILITY. Like Time Horizon, portfolios can be separated into different portions based on the purpose and objectives for that money.
Step 3: Find Your Porfolio
Once you know how long you plan on holding a particular investment & how much risk you are WILLING & ABLE to handle, selecting a suitable portfolio is simple. There are a wide range of investment options. Often the investments selected will be based on the return and risk characteristics of each available investment. Once again, investors may prefer to split their portfolio into different return and risk objectives based on the purpose of that portion of their investments.
The Tolerisk Score is the recommended starting point for your equity (stock) allocations. It is the lowest number between your Willingness & Ability. The Tolerisk score is a starting point to assist you in the overall allocation of your portfolio. For additional information on how to apply your Tolerisk score to your portfolio, consult your Financial Advisor.