Investing your entire portfolio in stocks is a risky strategy. At the same time, investing in only bonds or keeping your money as cash might force you to miss out when markets are doing well or during times of inflation.
Keeping a proper balance between stocks and bonds will help ensure that you capture all of the returns that are available to you.
Risk is where your return comes from, so you don't want to ignore it. Your goal is to find the right balance so that you're prepared to handle the risk in order to get the reward.
Determining your risk aversion score will help you understand how to balance your portfolio. This is one of many concepts, like optimization, that should be applied when managing your portfolio.
Risk aversion is one of the most important concepts to understand because it can be a gatekeeper when discussing stock investments with financial professionals.
Our goal with this product is to provide you with a basic level of understanding of risk aversion and how to apply it to your portfolio.
Your Risk Profile:
Recommended Balances:
How are Profiles and Balances calculated?
What are the Risk Profiles?
| Scoring | Profile Description | ||
|---|---|---|---|
| 8 | You are the most risk averse person. In every question you choose the answer that took on the least amount of risk. This means you should mostly avoid stock investing and instead focus on fixed income and bond products. | ||
| Very Risk Averse | |||
| 9 | You are very risk averse and do not like to take on risk. You should focus more on risk-free investments. | ||
| Very Risk Averse | |||
| 10 | You tend to avoid risk and making decisions that would prevent you from taking on too much risk. | ||
| Risk Averse | |||
| 11 | For the most part you are risk averse but you know how to take on just enough risk to ensure you don't miss out on an opportunity. | ||
| Risk Averse | |||
| 12 | For the most part you are risk averse but you know how to take on just enough risk to ensure you don't miss out on an opportunity. | ||
| Balanced | |||
| 13 | For the most part you are risk averse but you know how to take on just enough risk to ensure you don't miss out on an opportunity. | ||
| Balanced | |||
| 14 | Your willingness to take on risk just might be enough to earn you the reward you're after. | ||
| Slightly Risky | |||
| 15 | Your willingness to take on risk just might be enough to earn you the reward you're after. | ||
| Slightly Risky | |||
| 16 | Most investors fall into the moderately risky range. If you do your homework you can get what you want but if you're only half committed go for a more balanced approach. | ||
| Moderately Risky | |||
| 17 | Most investors fall into the moderately risky range. If you do your homework you can get what you want but if you're only half committed go for a more balanced approach. | ||
| Moderately Risky | |||
| 18 | Most investors fall into the moderately risky range. If you do your homework you can get what you want but if you're only half committed go for a more balanced approach. | ||
| Moderately Risky | |||
| 19 | You don't mind taking on risk and likely think that's where the value is. Don't get ahead of yourself and try to limit yourself to no more than 80% risky investments. As you age you'll want to take on less risk in an effort to securitize your money. | ||
| Risky | |||
| 20 | You don't mind taking on risk and likely think that's where the value is. Don't get ahead of yourself and try to limit yourself to no more than 80% risky investments. As you age you'll want to take on less risk in an effort to securitize your money. | ||
| Risky | |||
| 21 | You don't mind taking on risk and likely think that's where the value is. Don't get ahead of yourself and try to limit yourself to no more than 80% risky investments. As you age you'll want to take on less risk in an effort to securitize your money. | ||
| Risky | |||
| 22 | Taking on risk is your middle name. You do what you think has the most potential to work out. If you keep a realistic mindset about your risk level then you may be okay but a more balanced approach will help balance out your gains and losses. | ||
| Very Risky | |||
| 23 | Taking on risk is your middle name. You do what you think has the most potential to work out. If you keep a realistic mindset about your risk level then you may be okay but a more balanced approach will help balance out your gains and losses. | ||
| Very Risky | |||
| 24 | Somehow you choose the riskiest options in every scenario. This would indicate that you should invest your entire portfolio in stocks. This is a risky strategy. Pay attention to your beta. Otherwise you can experience a lot of volatility. | ||
| Very Risky | |||
This product is sponsored by Portfolio Degree.
If you want to learn more about how to manage your portfolio be sure to check out PortfolioDegree.com.