Investing requires more than a “once-size-fits-all” approach to risk tolerance and financial success. And, old assumptions based on age and gender ignore individual investors’ unique goals and needs. Young people don’t necessarily want an “aggressive” investment plan, while a “conservative” position for those nearing retirement may prevent them from achieving goals.
At Morse Wealth Management, we manage our client’s portfolios with awareness of their personal goals and aspirations. We build relationships to understand their needs and help them make sound decisions. To balance their portfolio more accurately, we also rely on Riskalyze — an award winning financial diagnostic software — to provide a clear understanding of their preferred approach to risk.
What Is Riskalyze?
Riskalyze is a financial tool that uses a Nobel Prize–winning economic framework to create a quantitative measurement of an investor’s true risk tolerance. The system assigns you and your portfolio a Risk Number on a scale of 1 (low risk) to 99 (high risk).
We compare your personal Risk Number to the Risk Number associated with your portfolio to determine if your portfolio reflects your personal preferences. If your portfolio is set up to take on less risk than you prefer, you may not meet your financial goals. Similarly, a portfolio with too much risk may cause losses during volatile markets, potentially creating stress for investors or derailing their progress. Riskalyze helps your advisor at Morse Wealth Management create a more accurate blueprint for your financial success.
How Do You Calculate My Risk Number?
We calculate your personal Risk Number with a short assessment questionnaire. After learning some basic information, you will answer a variety of questions relating to your risk and return preferences. Each question helps us pinpoint exactly how much risk you prefer to take on.
To determine the Risk Number associated with your portfolio, Riskalyze uses a 95% historical range of possible gains or losses over a 6-month period. This step also helps us understand and set expectations during volatile markets and help you feel prepared for what could lie ahead.
How Can Riskalyze Help Me Achieve My Goals?
Riskalyze has a variety of benefits. Most importantly, Riskalyze empowers you to better understand your current portfolio and how much risk you’re taking. By running a variety of “stress tests,” we can determine how your investments may perform during economic and market changes. Riskalyze gives you a clear picture of how much volatility you and your portfolio can handle and still achieve your financial goals. By doing so, it can help keep emotions out of investing and you on track toward your objectives.
The Takeaway
Morse Wealth Management and Riskalyze offer a detailed, specific, and simple explanation of your risk levels and how they align with your financial vision.