objectives and risk review

The end of the calendar year is a good opportunity to review, adjust, and take some actions relevant to a financial plan or investment strategy.  This blog post is one in a short series examining a few of those items.  The information below is not intended as formal advice for any particular circumstance, but rather a general discussion of the topic.

Whether you are a "DIY" investor or someone who works with a team of financial professionals, a crucial part of the ongoing process is to review your circumstances to ensure that what you are actually doing matches what you truly want and need to be doing.

investment objectives

While most of the talk around financial planning and investment strategy tends to get bogged down in numbers ("How much do I need to save to retire with $1,000,000 in the bank?!"), most people's objectives are actually driven by circumstance and expectations: What does today's income suggest about the ability to save for the future?  What does the current standard of living imply about the desired standards for retirement years?  These sorts of questions should definitely inform the initial approach to making investment decisions and/or building a financial "plan", but they are equally important for subsequent review of those plans.

Circumstances, expectations, and "needs and wants" change over time; be sure that you and your financial team are aware of the current "facts on the ground".

risk tolerance

As with investment objectives, a person's risk tolerance is core to the initial decisions around how they allocate their money to different types of investments.  A given person's or family's tolerance for risk can be driven by many factors: age, health, capacity to weather financial "bumps", the presence or absence of financial support, and many many more.  And many of those considerations naturally change over time.  A family with 2 kids in college may have a risk tolerance driven by the desire to fund those education costs "no matter what"; a person receiving a substantial inheritance may feel much more secure and able to "speculate" on some investments than they did a year before they knew about the inheritance.

Take some time to review your current feelings on risk and potential reward and then make sure that your existing approach to your financial goals match those feelings.

values