Page 18 - North Haven Magazine Issue 39 Summer 2025

Has your risk tolerance

changed over time? by Jeff Jolly

e is ho
w to tell.
Here is how to tell.
Her
Risk tolerance can play a large part in determining the structure and
composition of an individual's investments and financial plan. As an investor,
it’s important to know your risk tolerance for investments and be aware of
circumstances that may affect it. Evaluating your risk tolerance regularly
can help ensure your portfolio mix is still aligned with your current situation
and future goals. Here are five considerations to make when assessing your
risk profile:

1. Understand how risk tolerance can affect a portfolio. Investors with
conservative profiles are often individuals who have shorter investment
horizons or fewer assets. These investors are usually matched to similarly
risk-averse investment vehicles, such as bonds. Bonds generally offer lower
returns in exchange for their relative safety. A portfolio heavily weighted in
stocks is better suited to individuals with a high-risk tolerance. For example,
younger investors who have time to bounce back from market fluctuations or
investors with ample resources may utilize higher-risk investment options.
Similarly, wealthy individuals who are willing to take on more risk for the
potential of higher returns might explore IPOs, hedge funds, options and
futures and other alternative investments. Most investors find a balance
between risky and conservative portfolios. Risk tolerance is a spectrum, Risk tolerance is not static. Like many aspects of your life, it can change
and you can find equilibrium in your portfolio as a whole by adjusting the over time. When circumstances shift, it’s wise to evaluate whether your
riskiness of individual investments. investments are still appropriate. A financial advisor can help you assess
the health of your holdings and make adjustments that match your risk
2. Changes to your personal life. Big life events such as marriage, tolerance.
divorce, home ownership, parenthood or a job change can impact your
risk tolerance. For example, having a baby may compel you to be more Jeff Jolly, CFP® is a Private Wealth Advisor and Sr. Vice President with Ameriprise Financial
cautious about how you manage risk exposure because you’re responsible Services, LLC. in North Haven, CT. He specializes in fee-based financial planning and asset
for an additional member of your family. On the other hand, making the last management strategies and has been in practice for 20 years - To contact him, please call (203)
407-8188 x330, or visit the office located at 250 State St. Bldg E1, North Haven CT, 06473.
payment on your mortgage may give you more financial flexibility, and your
risk tolerance may adjust accordingly. (Required disclosure for CFP designation – delete if not applicable) Certified Financial Planner
Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED
3. Changes to external circumstances. Your risk tolerance can be FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque
design) logo in the United States, which it authorizes use of by individuals who successfully
influenced by matters outside your personal sphere of influence. Stock complete CFP Board’s initial and ongoing certification requirements.
market volatility, inflation and political events can contribute to your ease or Fixed Income
discomfort with investment risk. When big external events occur, you may There are risks associated with fixed-income investments, including credit risk, interest rate risk,
feel compelled to adjust your portfolio. Before doing so, keep two principles and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice
in mind: (1) It’s important for your investments to at least keep pace with the versa. This effect is usually more pronounced for longer term securities.
rise of inflation over time, overwise your portfolio will lose purchasing power. Stock Investment
(2) Staying invested is one of the best ways to weather through market Stock investments involve risk, including loss of principal. High-quality stocks may be
appropriate for some investment strategies. Ensure that your investment objectives, time
volatility. horizon and risk tolerance are aligned with investing in stocks, as they can lose value.
Alternative Investment
4. Consider your confidence with risk. Check your stress level when the Alternative investments involve substantial risks and may be more volatile than traditional
market fluctuates. You may not have the stomach for market dips. You also investments, making them more appropriate for investors with an above-average tolerance for
risk.
may be less comfortable with risk if you have other reasons to avoid it:
you’ve taken on more debt, had a reduction in your income, or have seen Options
Options involve risk and are not appropriate for all investors. Before entering into any
an increase in your cost-of-living expenses. Older investors may be most options transaction, clients must receive the document entitled Characteristics and Risks of
concerned with safeguarding principal and earning reliable, even if modest, Standardized Options.
returns. If you have noticed your discomfort with risk increase, speak with a Hedge Funds
financial advisor about potentially adjusting your portfolio mix. An investment in a private fund involves a substantially more complicated set of risk factors
than traditional investments in stocks or bonds, including the risks of using derivatives, leverage
5. Progress towards goals. Younger investors can usually manage more and short sales, which can magnify potential losses or gains. Restrictions exist on the ability to
redeem units in a hedge fund. Private funds are speculative and involve a high degree of risk.
risk because they have years ahead of them in which to make up for market Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should
downturns. A windfall or other improvement in your finances may allow you consult with their tax advisor or attorney regarding their specific situation.
to take on more risk. Alternatively, drawing nearer to your goals – such as
a child’s college enrollment or retirement – may mean you need to take on Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits
or obligations of, or guaranteed by any financial institution, and involve investment risks
less risk to protect the money you need. (But remember: retirement investors including possible loss of principal and fluctuation in value.
should also consider that their nest eggs may need to last several decades).
Securities offered by Ameriprise Financial Services, LLC. Member FINRA and SIPC.
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