Understanding Investment Risk
Free Portfolio Risk Analysis
Risk Assessment
Before you begin to "Know Your Course" you must understand your personal Risk Tolerance.
Assessing risk is a daily event in all of our lives, whether it is choosing your morning route to avoid heavy traffic, or deciding when to cross the street. All these decisions are driven by the assumptions you make based on personal experience, outside influences and your assessment of the risk that you perceive versus the outcome or reward that you hope to achieve. By properly assessing your risk tolerance you will be better able to gauge your financial capacity to take such risks.
To find out how much risk you are taking, and what your comfort zone is, Click the Portfolio Risk Analysis Tab above, once completed, we will send you a customized report detailing your current level of risk as well as your ideal level of risk based on your results.
The "Time Horizon."
While the past may give us investment guideposts and benchmarks, an investment strategy must always look to the future and work within the context of your individual personalized goals and time frames.
Therefore, the key to a successful investment strategy is to allocate your assets based on your personal "time horizon" - the time frame in which you plan to use your money. Once your basic strategy is determined, implementing your investment program becomes more meaningful.
Diversification
Our goal is to develop a diversified portfolio* that is designed with the goal to maximize return based on your definition of acceptable risk. Your personal time horizon helps to determine the most appropriate blend of asset types to attain the best possible risk-to-reward ratio for you.
Ultimately, the purpose of diversification is to protect your assets by spreading your risk across multiple investment classes, thereby smoothing your ride through investment fluctuations.
You`ve worked hard to accumulate your wealth. Now is the time to build upon what you have, while seeking security and success.
Chart 1 (Risk Assessment)
Westcore Funds / Denver Investment Advisers LLC 1998
Chart 2 (The Time Horizon)
Certain assumptions have been made to arrive at these average return numbers.
- The historical rate of return on stable value investments has ranged from just under 4% (Treasury bills) to nearly 8% (investment contracts). The assumption is that a blend of these returns would average about 6% for a low-risk investor.
- Corporate bonds have had an average return of about 6% over 77 years, while stocks have returned over 10%. A moderate risk investor using both stocks and bonds would have earned a blend of these returns, or 8%.
- An aggressive investor, with a majority of investments in stocks, would have earned 10%.
Chart 3 (The benefits of diversification) did not have any foot note reference as to any specifics used or quoted in the making of this graph.
*There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk