How Aggressive Should You Be With Your Portfolio?

How Aggressive to Be

Not sure how aggressive or conservative to be with your investments? It is a tricky subject so let me help you understand what goes into how aggressive you should be.

Deciding how to aggressive or risky to be with your investments can be based upon a number of factors.

Today we are going to take 3 of those factors into consideration: how long you have until you start pulling your money out, your risk tolerance and projected expenses.

Timeframe

People have often said to invest aggressively when you are younger and then become more conservative as you get older. This would mean when you are younger you would have a portfolio with a higher percentage of stocks (higher risk) and a very low percentage of low-risk investments (like bonds).

But now it seems those assumptions no longer work. There’s hardly any pension plans and who knows where Social Security will be when we are ready for it. The majority of money we will need will be up to us to provide for ourselves.

We need to make sure we are increasing our investments and becoming more aggressive even over the long-term. We need to build the largest nest egg as possible and higher risk usually means higher returns.

Higher risk isn’t a guarantee for higher returns, but low risk is definitely not a guarantee for higher returns.

It’s common for financial planners to even recommend keeping some of your investments in growth investments during retirement.

The old adage was to be aggressive during your younger years and become more conservative during older years has now changed. Even though your timeframe for pulling your money out is still taken into consideration, it’s no longer such a drastic change over a longer timeframe.

Keeping some of your portfolio in high risk investments during your ‘financial freedom’ years is now recommended.

Be aggressive. Stay aggressive.

Risk Tolerance

Risk tolerance is how much risk you’re willing to handle to get a better return.

The higher your risk tolerance the more you’ll be able to handle investing in stocks (higher risk investments) which could provide higher returns.

Becoming more familiar with investing and realizing the higher returns you can receive by being more aggressive will help increase your risk tolerance.

We want you sleeping at night, but we also want your investments growing as much as possible.

Leaving your emotions at the door will also help increase your risk tolerance. If you see your investments start to drop, buying more instead of selling them is the direction we want to head.

Let go of the fear and panic, take a deep breath and let your investments ride it out. As history shows the stock market always rises again.

Expenses

Recognizing you’ll have expenses during your financial freedom years is important. You’ll want to make sure all of your expenses will be covered from your investments.

Which again, higher risk means the potential for higher return.

Trying to keep your expenses low during retirement isn’t any fun. I know we need to be practical, but we need to have some fun as well. After All, we did work hard so we could play hard.

Enjoying our financial freedom years without having to worry about basic expenses is something we want to make sure happens.

We can do that if we are getting high returns on our investments so pulling back all the way on the riskiness of our investments may not be the best plan for us.

Sure, having some more conservative investments as we get older will help give us peace of mind, but having all of our investments be conservative won’t continue to get us high returns.

Remember, without the risk we won’t receive the higher return. Although we want to consider our time frame, risk tolerance and expenses, we need to recognize we need to be getting a higher return on our investments more now than ever.

If you need help on what to invest in and how to invest in the stock market, check out my course, From Confusion to Clarity: Stock Marketing Investing 101, here.

Are you on the path to financial freedom? Share what you’d like to invest in below!

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