February 2024
“Each sunrise brings a new day filled with new hopes for a new beginning.”
— Debasish Mridha, physician, writer, philosopher, and philanthropist
During these early days of the new year, it’s natural to contemplate fresh starts and exciting possibilities. This year holds the promise of new beginnings, new goals, and a renewed focus on achieving your financial dreams. Yet, amidst the optimism, a question often arises: how much risk are you comfortable taking to reach those goals?
Understanding your risk capacity and risk tolerance is crucial to navigating the financial landscape with confidence. Both play distinct, yet interconnected, roles:
- Risk Capacity: This refers to your objective ability to withstand financial losses based on factors like income, assets, liabilities, and financial obligations. Think of it as your financial safety net.
- Risk Tolerance: This reflects your emotional comfort level with potential losses. It depends on your personality, investment experience, and financial goals. It’s the “emotional stomach” you have for volatility.
While your risk capacity is often quantifiable, your risk tolerance is deeply personal. It’s not one-size-fits-all, and it can evolve over time. Life events, career changes, and age can all influence your willingness to accept risk.
Therefore, the start of this year presents an ideal opportunity to revisit your risk profile. Ask yourself:
- Are your current investments and asset allocations aligned with your risk tolerance?
- Have your life circumstances changed in ways that are impacting your risk capacity?
- Do you feel comfortable with the potential fluctuations in your portfolio?
Honest introspection is key. Ignoring misalignments could lead to unnecessary stress and potentially derail your financial journey.
In today’s interrelated world, it’s easy to fall prey to FOMO — the Fear of Missing Out on potentially higher returns by choosing a conservative approach. However, chasing “hot” investments without considering your risk tolerance can be damaging. Remember, sustainable growth is often built on a foundation of prudent risk management, not treacherous gambles.
That said, calculated risks can be powerful tools for achieving your goals. By understanding your risk profile and diversifying your portfolio across asset classes, you can potentially unlock opportunities for growth while mitigating potential downside.
As your financial advisor, we are here to guide you through this process. Together, we can:
- Review your risk tolerance: Through open discussions and risk assessment tools such as the Retirement Income Style Awareness (RISA) personality survey, we can gain a clear understanding of your comfort level with risk and how we implement your retirement portfolio.
- Analyze your existing portfolio: We can assess your current holdings to gauge how they align with your risk profile.
- Develop a customized investment strategy: We can tailor a plan that balances potential returns with your risk tolerance, ensuring alignment with your overall financial goals.
- Continuously monitor and adjust: As markets evolve and your life circumstances change, we’ll work together to adapt your strategy accordingly.
Remember, navigating risk isn’t about avoiding it altogether; it’s about making informed decisions based on your personal circumstances.
Embrace new beginnings confidently. Let’s embark on this journey together, with a clear understanding of your risk profile and a strategy that empowers you to achieve your financial goals. Please don’t hesitate to schedule a meeting to discuss your individual needs and concerns.
The Markets
Stocks closed January generally higher. Each of the benchmark indexes listed below ended January higher, except for the small caps of the Russell 2000. Historically, positive market returns in January are often a precursor to favorable market performance for the remainder of the year. Of course, past performance is no guarantee of future results. Despite the end results, January proved to be a month of ebbs and flows. It began with stocks closing in the red, only to pick up momentum throughout the rest of the month. The most recent inflation data showed prices inched higher in December after falling the previous month. Both the Consumer Price Index and the personal consumption expenditures price index increased, both monthly and annually. However, core prices, excluding the more volatile food and energy indexes, declined over the 12 months ended in December.
|
Market/Index |
2023 Close |
January Close |
Monthly Change |
YTD Change |
52-week Change |
|
Dow Jones |
37,689.54 |
38,150.30 |
1.22% |
1.22% |
11.92% |
|
Industrial Average |
|||||
|
NASDAQ |
15,011.35 |
15,164.01 |
1.02% |
1.02% |
30.90% |
|
S&P 500 |
4,769.83 |
4,845.65 |
1.59% |
1.59% |
18.86% |
|
Russell 2000 |
2,027.07 |
1,947.34 |
-3.93% |
-3.93% |
0.80% |
|
S&P Global Ex-U.S |
226.78 |
224.07 |
-1.19% |
-1.19% |
3.28% |
|
10-year Treasuries |
3.87% |
3.97% |
0.10 |
0.10 |
0.44 |
We hope 2024 is off to a great start for you and your family. As we say goodbye to 2023 and finish the first month of 2024, we wanted to express our sincere gratitude for your entrusting us with your financial journey. Your trust means the world to us, and we are committed to working hard to earn it every day.
The Nalls Sherbakoff Group, LLC