What is Risk Tolerance?

Understanding risk tolerance is crucial for crafting investment strategies that align with your goals and comfort levels. We begin by having each client complete a questionnaire to assess attitudes towards market fluctuations and risk. This questionnaire helps us gain insight into your risk tolerance levels. By asking a series of questions about your financial goals, investment experience, time horizon, and reactions to hypothetical market scenarios, we can gauge your comfort with different levels of risk. This information is invaluable for designing investment portfolios that strike the right balance between risk and potential returns.

While risk tolerance relates to emotional responses to market volatility, risk capacity is more objective and measurable. It reflects your personal comfort level with market volatility and your ability to withstand potential losses. Factors such as age, financial goals, investment timeline, and personal temperament all influence one's risk tolerance. Risk capacity considers factors such as income, savings, assets, and financial obligations that determine one's ability to weather market downturns. 

Risk tolerance is not static; it can change over time due to various factors, including life events, market conditions, and evolving financial goals. Therefore, it's essential to review and reassess risk tolerance periodically, ideally at least once a year. By staying attuned to changes in your circumstances and attitudes towards risk, we can adjust our investment strategies accordingly to ensure they remain aligned with your objectives.

Ultimately, understanding risk tolerance empowers you to make informed decisions about their investments. By knowing their risk tolerance level and the potential implications for their portfolios, you can navigate the ups and downs of the market with confidence and peace of mind.

Advisory services provided by NewEdge Advisors, LLC doing business as Middlebrook Wealth, as a registered investment adviser. Securities offered through NewEdge Securities, Inc., Member FINRA/SIPC. NewEdge Advisors, LLC and NewEdge Securities, Inc. are wholly owned subsidiaries of NewEdge Capital Group, LLC. NewEdge Advisors, LLC (“NewEdge Advisors”) is a registered investment advisor. Advisory services are only offered to clients where NewEdge Advisors and its representatives are properly licensed or exempt from licensure. This website is solely for information purposes. Past Performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by NewEdge Advisors unless a client service agreement is in place. The information in this material is not intended as tax or legal advice. Please consult your legal or tax professionals for specific information regarding our individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.