The Smart Take:
What type of investor are you? Are you conservative, moderate, or aggressive?
These qualitative descriptors are how most think of risk. But what is conservative to you may not be conservative to another. Rather than using non-measurable descriptions of risk, your customized retirement plan needs to be the foundation to objectively measure risk. Then and only then can the three types of risk — required return, risk capacity, and risk tolerance — be accurately evaluated and aligned.
Why is this important? Take too little risk and it can be a conservative way to go broke. Take too much and you may go broke more quickly. Like the story of the Three Bears you want it just right.
Reminder: Investment returns are not guaranteed. There are costs to invest. Expectations discussed are just estimates and are probability-based (range-based) and are from Blackrock, Research Affiliates, and Vanguard per data available on their websites.
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