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Financial Planning

Fortune 500 Employees Must Have Risk Tolerance in Uncertain Times

 

The world of investing is highly subjective, and the investment strategy that is suitable for you will depend heavily on your risk tolerance. We would like our Fortune 500 clients to remember that it is impossible to completely avoid risk when investing, but it is possible to manage it.

According to a recent study published in the Journal of Financial Planning in September 2022, it is crucial for Fortune 500 employees approaching retirement to reassess their risk tolerance. As individuals near retirement age, their risk tolerance tends to decrease due to the need for more stable and reliable sources of income. This study suggests that considering a shift towards a more conservative investment strategy, with a focus on preserving capital and generating consistent income, may be beneficial for those nearing retirement. It emphasizes the importance of aligning investment decisions with changing risk preferences as individuals transition into the next phase of their financial journey.

Fortune 500 employees must consider two aspects of their risk tolerance: (1) the ability of their investment plan to sustain losses, and (2) their own comfort level with risk. The first factor is quantifiable: the greater your investment plan's loss tolerance, the greater its risk tolerance. As we've discussed, a longer investment time horizon may enable you to assume greater risk than a shorter one.

"You can’t completely avoid risk when it comes to investing, but it is possible for you to manage it.." man on rope

The second factor, your personal risk tolerance, is more of an emotive measurement that depends on a variety of factors, such as your goals, life stage, personality, and investment experience. Some investors are comfortable with high levels of risk, whereas others can only tolerate minimal levels of risk. Individual risk tolerance is an essential factor for Fortune 500 employees to consider when determining which individual investments are suitable for them and how their investment dollars should be allocated among various investment classes.
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For the purpose of discussing risk tolerance, investors are typically divided into three categories: aggressive (those with a high-risk tolerance), moderate (those willing to tolerate some risk), and conservative (risk-averse).

Investing in the financial markets is like embarking on a journey through rough waters. Fortune 500 employees have different levels of comfort and confidence when faced with the uncertainties and risks that lie ahead. Imagine you are on a boat, navigating through a vast ocean. The size of your boat represents your risk tolerance. Some of you may choose a small, agile vessel, allowing you to maneuver swiftly but with the understanding that it may be susceptible to rough waves. Others may opt for a larger, more stable ship that offers a smoother ride but may move more slowly. The choice of vessel is a reflection of your risk tolerance, combining your ability to handle losses and your personal comfort level. By recognizing your risk tolerance and selecting the right boat for your journey, you can navigate the investment waters with confidence, ensuring a smoother voyage towards your retirement goals.

This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, Alcatel-Lucent, AT&T, Apache Corporation, Altria, Avaya, Baker Hughes, Bayer, Boeing, BP, Bristol Myers Squibb, Chevron, Concho Resources, Hughes, fidelity.com, Wyeth, Northrop Grumman, Merck, Raytheon, Coca-Cola ,Qwest, Pfizer, Caterpillar, ConocoPhillips, ExxonMobil, Sempra Energy, San Diego Gas & Electric Company, Southern California Gas Company, Ameren, Anheuser-Busch, APL, Bank of America, Blackhawk Networks, Caterpillar, CenturyLink, Chevron, Citigroup, Clorox, Coca-Cola, Colgate, Con Edison, ConocoPhillips, Dexone, ExxonMobil, GlaxoSmithKline, Halliburton, Hewlett Packard Home Depot, Honeywell, HP, IBD, Johnson Controls Kaiser Permanente, Kimberly-Clark, Kinder Morgan, Lockheed Martin, McCormick Spice, Merck, Monsanto, Northrop Grumman, Occidental Petroleum, Pepsi, Pfizer, PG&E, Phillips 66, Phillip Morris, Qwest, Raytheon, Royal Dutch Shell, Safeway, San Diego Gas & Electric, Schlumberger, Scotts Miracle Gro, Sempra, Siemens, SoCal Edison, Sony, Southern California Edison, Teradata, Toyota Motor Corporation, Tropicana, United Parcel Service, Verizon, We Energies Group, Wisconsin Energy, Wyeth, Verizon or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with FSC Securities and may be reached at www.theretirementgroup.com.

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