Investment risk: It’s personal

Published: February 1, 2016

“That’s too risky!” our clients may exclaim regarding a potential investment strategy. But what does risk really mean to you? The answer depends on your personal circumstances, time horizon and goals. Keep in mind that investment return is one way of measuring investment risk. So while we all have to take risk to achieve returns, what entails the right risks for you may be completely different for someone else. 

Some examples of how personal circumstances impact risk are:

  • Ongoing cash flow needs:  If you are past the wealth accumulation stage, generating cash flow to maintain your lifestyle may be your primary concern. As a result, fluctuating income may be the primary risk that impacts you. Consequently, you may be more willing to take on necessary but prudently chosen credit or maturity risk in order to preserve yield. 
  • Long-term wealth accumulation goals: You may have a long-term goal of leaving a substantial gift to a cherished cause and may not need personal access to these funds for the foreseeable future. In this case, it may be appropriate to allocate part of your portfolio to private equity investments that have low liquidity and a wide range of possible outcomes, but could have significantly higher potential for growth.

 

These are just two examples of circumstances our clients experience. KF Advisors understands that our clients typically have multiple goals, each with a different ability to accept risk to achieve the desired returns.  Our mission is to help our clients determine what they wish to accomplish with their wealth, understand the risk implications and develop a plan to help achieve their objectives. Helping you manage risk is one of the best ways we can help you manage your financial life.

Important Disclosures

This material is provided for informational or educational purposes only and should not be construed as investment, accounting, tax or legal advice. Always consult a financial, tax and/or legal professional regarding your specific situation. This communication is not intended as a recommendation or as investment advice of any kind. It is not provided in a fiduciary capacity and may not be relied upon for or in connection with the making of investment decisions. Nothing herein constitutes or should be construed as an offering of advisory services or an offer to sell or a solicitation to buy any securities or a recommendation to invest in any specific investment strategy. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future returns. The views expressed herein are as of a particular point in time and are subject to change without notice. The information and opinions presented herein are general in nature and have been obtained from, or are based on, sources believed by Klingenstein Fields Advisors (“KF Advisors’) to be reliable, but KF Advisors makes no representation as to their accuracy or completeness. Although the information provided is carefully reviewed, KF Advisors cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided. KF Advisors represents two investment advisers registered with the Securities and Exchange Commission: Klingenstein, Fields & Co., L.P. and KF Group, LP. If you are a KF Advisors client, please remember that it remains your responsibility to advise KF Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.