How To Determine Your Investment Risk Profile

How do I determine my "risk profile"?

Determining one's risk profile is really a difficult thing to do. What we are saying with a risk profile is usually it's your individual risk profile. How much risk tolerance can you as an individual take. The problem with that is the place you are when you are thinking about what your risk profile is going to be, is different than actually being in that risky situation. If we are in a time when the market is doing really well, it is easy for you to stand back and say, "Oh yeah, I can accept a 1% loss." When you are actually in the middle of that 1% loss of your portfolio you are going to feel very different. Traditionally, risk profile is a way of finding out how much risk can you take. In practice, they really aren't that helpful because we are always asking the questions in a different environment than the actual risk we are concerned with.