Imagine a world where there were no speed limits. How fast would you go? I’m sure there are certain situations where you might be inclined to push your limits, like if you are running late to an appointment or are especially anxious to get to your destination. Beyond that, for everyday travel, would you be comfortable going 95 mph in a 65-mph zone? Would you race at 50 mph down a residential street? The fact of the matter is, we all have our own limits, or tolerance, for traveling safely. Who would feel comfortable commuting to and from work going 120 mph? This same concept applies to your investments. Do you know how fast you are going and, more importantly, what your limits are? What is your risk tolerance?
Risk tolerance is the degree of variability in investment returns that an investor is willing to withstand. In other words, does your portfolio reflect your limits? Is it fast (with volatile investments) or is it painstakingly slow (with gains so small that it takes decades to see growth)? Does your investment allocation have you going over the speed limit you are comfortable with, or are you not going fast enough?
When it comes to investing, the speed limit is different for everybody. Unlike the highway, there is no universal speed limit with investing. Two questions must be answered. First, what is your own unique speed limit? And second, are you going too fast or are you going too slow? Depending where you are in your financial journey (whether you are just starting out or are close to retirement), there are speed zones you need to be aware of. Those who are just beginning their financial journey have more flexibility when it comes to speed limits than those nearing retirement. The key is that there is no rule of thumb to follow. Each individual has his or her own set of circumstances that require a customized plan.
So, how do you find out what your speed limit is and how fast you need to be going? Click HERE and answer a few short questions and determine at what speed you are comfortable with regarding your investments. Then you can have your portfolio analyzed by The Retirement Planning Group to determine if it has you going the right speed. We’ll get you on the right track!
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