How do you feel about risk when it comes to investing? In my experience, when the markets are up, my clients tend to be less risk averse than when the markets are down. Being risk averse isn’t bad. In fact, understanding them and their risk aversion is a big part of how I minimize risk for my clients.
What is risk aversion?
Risk aversion is simply how a person reacts when faced with uncertainty.
Not many people will raise their hand and say they love a high level of risk, especially when it comes to how their money is invested. It is my role as your financial advisor to understand your attitude toward risk and investing so that we make the appropriate choices.
For investors, the level of risk they are willing to take can vary depending on their stage of life. Younger investors tend to be willing to take on more risk than those who are closer to retirement but that isn’t always the case. That’s why I ask my prospective clients about their willingness to take on risk when it comes to financial planning and continue to do so when they become clients.
How I Minimize Risk for My Clients
Often my clients come to me when they’re ready to talk about retirement planning. Perhaps they had an employer sponsored plan and want to roll it over now that they no longer work for that employer. Perhaps they’ve maxed out the employer retirement benefit and want an additional plan for retirement savings. No matter the reason, one of the biggest risks for retired folks is when their money outpaces inflation. It is important to note that clients don’t need to retired to have this fear. Working together, we counter the fear with a more conservative approach to investing that meets their financial goals while being understanding of their risk aversion.
At Thimbleberry Financial, we minimize risk through investment strategy.
As your financial advisor, part of my role with clients is to make sure we’re rebalancing their portfolio on a regular basis so that we have the right mix of assets. Assets include stocks, bonds, a combination of stocks in mutual funds, and real estate investments.
If we were to take too conservative of an approach, we could end up causing a short fall when you actually need that money. That’s a scenario we want to avoid while also keeping your attitude about investment risk in mind.
Often I find that couples have differing views on risk which means we need to find a place where you’re each comfortable while also meeting your financial goals that we’ve discussed at our meetings.
Interested in learning more? Contact Thimbleberry Financial to start the conversation today!