The stock market is a roller coaster this week — and not everyone likes roller coasters, especially when they cause retirement account balances to drop.
Risk tolerance and risk capacity are two very separate, but important, concepts when making a portfolio. The first relates to the risk someone is comfortable having in their accounts — for example, someone who goes to the Las Vegas casinos and doesn’t mind major losses at the blackjack table has a high risk tolerance — whereas risk capacity is tied to how much risk a portfolio can or should allow for to meet the individual’s goals.
Some advisers have also suggested having a year or two’s worth of living expenses in cash, which is easily accessible and allows investments to remain untouched completely during volatility. Other advisers use more than three buckets when investing retirement assets.Most retirement investors, especially those who don’t need to access the money immediately, should avoid checking their accounts too frequently.
Stay on top of your retirement by running your own numbers.
Step 1: Venmo me your discretionary cash. Step 2: Eat shit.
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