Understanding Risk
We all look at rewards and risks differently based upon our varying life experiences and personal financial experiences, this is normal.
At Integrity Wealth Advisors we utilize a Risk Number to objectively pinpoint individual investor risk tolerance. The Risk Number questionnaire process was built upon decades worth of behavioral economic work including, but not limited to, the academic framework called Prospect theory (Princeton.edu) which won the Nobel Prize for Economics in 2002.
The Risk Number, and corresponding risk/reward range, empowers the advisor-client relationship with stated expectations. Gone are the days of clients and advisors putting their faith in subjective, loosely defined semantics such as moderate, conservative, moderately conservative.
THE RISK NUMBER™ TOOL
With a Personal Risk Number™ You Will:
• Learn About Your Risk Tolerance• Align Your Portfolio Objectively• Address Your Retirement Goals
Risk Number™ is powerful technology that identifies acceptable levels of risk and reward in your financial portfolio that you are comfortable with. Using this tool, we ensure that your portfolio aligns with your investment goals and expectations. Together we strive to take the guesswork out of your financial future.
CAPTURING YOUR RISK NUMBER™
The first step is to complete a 5-minute questionnaire
This will cover topics such as portfolio size, top financial goals, and what you’re willing to risk for potential gains. Then we’ll pinpoint your exact Risk Number™, and use it as a guide in creating your individual financial plan.
We will also review your current investments. A lot of people have more risk in their portfolios than they previously realized. This technology empowers us to make sure the Risk Number™ of your portfolio matches your personal Risk Number™.
ALIGNING YOUR PORTFOLIO
After pinpointing your Risk Number™, we’ll craft a portfolio that aligns with your personal preferences and priorities, aiming to help you to feel comfortable with your projected outcomes. The resulting proposed portfolio will include projections for the potential gains and losses we should expect over time.
Stress Test Investments
Stress tests illustrate how your proposed portfolio would have fared through various market events over the past 8 years, including the financial crisis and recovery.
Review Risk & Reward Potential
We can visualize the risk and reward profile for each individual investment we propose for your portfolio. Illustrating risk, reward and diversified risk gives us a powerful tool to review before we make any final investment decisions.
ADDRESSING YOUR RETIREMENT GOALS
Build a personalized independence plan for your financial future
We will also review your progress toward your financial goals by building a personalized independence plan Map. When we are finished, you’ll fully understand what we can do to increase the probability of success.
REAL WORLD CASE-STUDY
Gary & Renee Smith
RETIRED, AGES 67 & 64
The Smiths are a retired couple who reached out to us to review their portfolio after becoming concerned with its performance. We examined the portfolio and measured the risk within, and determining that it had a risk number of 78.
CURRENT PORTFOLIO: RISK #78
ACTUAL RISK TOLERANCE: RISK #29
After taking the risk exercise we discovered that their true risk number was 29, significantly lower than the current amount of risk carried in their portfolio. The Smiths were taking far too much risk according to their true risk tolerance, it’s no wonder they felt so uncomfortable with their retirement savings investment portfolio! The Smiths became clients and we implemented a financial plan & a portfolio that was in accord with their risk number and current lifestyle all the while seeking opportunity in the current economic landscape.
WHY WE USE THE RISK NUMBER TECHNOLOGY
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