Financial Independence, having enough income from an investment portfolio that we can work because we want to, not because we have to is a primary goal of a financial plan.
A key to the successful creation of a portfolio is an understanding of risk and reward. The greater the risk that one assumes the greater the potential reward.
How much risk should you have in your portfolio? The answer to that question is different for each person and changes as one goes through the different stages of life.
There are competing philosophies.
- You can afford to take the risk when you are young because you have time to recover if you experience losses.
- Start out with a solid base of emergency funds and safe investments then move on to equities, real estate, and other investment asset classes.
Regardless of the approach desired, building a diversified portfolio is an exercise in risk/reward assessment.
Historically people have used approaches that result in fuzzy, subjective terms, e.g. moderately conservative that may have different meanings to each person.
To address this limitation, we utilize software based on Nobel Prize winning technology that quantifies the amount of risk one is willing to accept and analyzes the make-up of a portfolio to make sure that it is line with our client’s willingness (and need) to assume