Do Your Investments Match Your Risk Tolerance?

by Ronald Stevenson and Barbara Clark Stevenson

In today’s uncertain financial landscape, we believe it is more important than ever to establish a well-maintained portfolio that can help you reach your financial goals. Your portfolio needs to not only meet your need for capital, but also provide you with financial peace of mind.

While there’s no simple formula to help you figure out how your portfolio should be constructed, determining the right asset allocation should be the first step in the process. To properly ascertain your financial situation, there are a few important things to consider: age, time horizon, amount of capital to invest and future capital needs.

What’s Your Risk Tolerance?

Another important thing to be aware of is your risk tolerance. Would you be willing to risk funds for the possibility of greater gains? While everyone wants to reap the rewards of high returns, not everyone can handle the high stress levels they can cause.

On the other side, avoiding investment risk isn’t always a wise decision. It is possible for portfolios to be too conservatively constructed, which makes them unable to provide the necessary long-term growth needed to outpace inflation and build wealth. Many investors seek absolute safety and keep their money in bank accounts, certificates of deposit (CDs) and other financial products without realizing that these “safe” choices may incur their own set of risks.

These risks include investment opportunity loss and the destruction of purchasing power resulting from inflation. When investors fail to take advantage of returns that a portfolio of growth investments can produce over time, this is called investment opportunity loss. Inflation can also hurt your investments as it is often regarded as the silent destroyer of low-risk portfolios as purchasing power declines over time.

Finding the Right Balance

You need to find the right balance for you — one that satisfies your risk tolerance while also achieving an appropriate amount of growth and income.

At American Financial Investments LLC, we can help you create a financial strategy that fits your individual investment objectives and goals. Allow our team to use our knowledge and experience to help manage your portfolio during various economic conditions and investment market cycles. Allow us to help you determine your risk tolerance using proprietary surveys, analyzing your finances, and discussing your retirement and financial goals in-depth.

We believe that your best bet for steady, long-term growth of your investments is having a well-diversified portfolio. This can help protect your assets from the risks of large drops and structural changes in the economy over time. When you work with the right financial professional, they can help you diversify, make adjustments when necessary and increase your odds for long-term financial success.

About the authors: Ronald F. Stevenson and Barbara Clark Stevenson own American Financial Investments LLC.  American Financial Investments LLC offers Retirement Income Planning, Social Security Maximization, Personal & Corporate Tax Preparation and Planning. For more information, call 928-771-8368 or visit, 3112 Clearwater Drive, Suite B, Prescott, AZ 86305

Advisory services are offered through American Financial Investments LLC, a Registered Investment Advisor in Arizona. Insurance products and services are offered through American Financial Security, LLC. American Financial Investments LLC and American Financial Security, LLC are affiliated companies. American Financial Investments LLC and American Financial Security, LLC are not affiliated with or endorsed by the Social Security Administration or any government agency. Whenever you invest, you are at risk of loss of principal as the market does fluctuate. Past performance is not indicative of future results. Purchases are subject to suitability. This requires a review of an investor’s objective, risk tolerance and time horizons. Investing always involves risk and possible loss of capital.