You have, likely, heard the terms “moderate” and “aggressive” that advisors tend to use. We use a calculated Risk Number® as a measurement of an investor’s true risk tolerance. This bases risk tolerance on a scale from 1-99. Higher Risk Numbers indicate a higher level of risk and potential return.
Using a Risk Number removes the danger of stereotyping investors in cases where one might generalize based on age. Where an assumption might be young and aggressive as opposed to, old and conservative. This Risk Number also gives a metric of how aggressive or conservative one might be.
Once we have determined an investor’s Risk Number, we can choose one of our model portfolios that closely matches that determined number, or create a strategy specific to the client. This will help to make sure that the client’s expectations are in line with the model that they are invested in.