Your Relationship with Risk
One thing we have noticed over the years is that people’s comfort with investment risk can change depending on what is happening in the market.
When the market is doing well, it is easy to feel comfortable taking on more risk. When the market becomes uncertain and account values decline, the natural reaction is often to want to take risk off the table.
Those feelings are completely understandable. Money is personal, and watching the value of your investments move up and down can be emotional. The challenge is that reacting to those feelings in the moment may not always support your long-term financial plan.
Sometimes, the urge to take on more risk appears after markets have already risen, while the urge to become more conservative appears after they have fallen.
This is why our financial planning process begins with your goals, not with what the market is doing today.
How Much Risk Do You Actually Need?
When we look at your financial plan and future projections, one of the questions we consider is how much investment risk you may need to take to pursue your goals.
If your plan shows that you do not need to take significant risk, there may be no reason to accept more ups and downs than necessary. If you want to take on additional risk and it fits within your overall financial plan, we can have that conversation as well.
The important thing is that the decision is based on your life and your plan, rather than on a temporary feeling about the market.
We also want to understand how much risk you are truly comfortable living with. A strategy may look appropriate on paper, but it still needs to feel manageable when the market is going through a difficult period.
Life Changes Can Affect How Risk Feels
This conversation becomes especially important during major life transitions.
We work with many clients who have recently gone through a divorce, lost a spouse, or entered retirement. Some are managing investments for the first time because someone else previously handled the household finances. Others are beginning to rely on their savings after years of receiving a paycheck.
These are times when people naturally begin watching their assets more closely. That attention can reveal a lot about how you really feel about risk.
You may discover that market changes bother you more than you expected. You may feel tempted to check your accounts every day or make a change whenever the news becomes unsettling. Those reactions are worth paying attention to. They are not something to ignore or feel embarrassed about.
Your feelings about money matter.
Bringing Your Feelings and Your Financial Plan Together
Good financial planning is not only about numbers. It is about combining the logical and analytical side of planning with the very real emotions you have about your money.
We want to understand what your assets need to do for you, but we also want to understand how you feel along the way.
The goal is to position your investments in a way that supports your long-term plans while helping you feel comfortable staying the course through the normal ups and downs of the market.
Your comfort with risk may change as your life changes, which is why this should not be a one time conversation. It is something we can continue to revisit together.
Ultimately, the right amount of risk is personal. It should reflect your goals, your financial needs, your stage of life, and your emotional relationship with money. When those pieces are considered together, you can make investment decisions with greater clarity and stay focused on what matters most: the life you are building.