As I get older I am sure my feelings and risk tolerance will change. Is there anything you would add or take away from this chart? If I could I would add a Lending Club account to this but the state of Massachusetts does not let any residents use these types of accounts. Please reply with any questions or comments. I am always open to the opinions of other bloggers or non bloggers!
Thursday, June 19, 2014
What is your risk profile?
I have been trying to figure out a perfect balance of assets for a 29 year old such as myself. I have come up with my own personal risk profiles and would like to get the opinion of others to see where they are at. When it comes to finding out where your money should be, I hear a lot of financial experts say that at my age I should have 70-80% of my money in stocks, and 20-30% in bonds. I am assuming that this is after you have saved up 6-12 months worth of living expenses into an emergency fund. However everyone is different. Some of us have stocks, bonds, savings accounts, checking accounts, CD’s, 401k’s, cars, boats, homes, etc. These are all considered assets that make up your total net worth. When calculating net worth, some people like to include all of these assets, and others like to just include assets that appreciate over time. I don’t like to include my 2004 Cadillac Deville as part of my net worth because every year this vehicle is worth less. For the purpose of this example I am going to use a pie chart in order to see where all of my money should be. I understand everyone has different goals and assets so their risk profile might be completely different then mine. Some people might just keep all of their money in a savings account because they don’t have any room for risk. That is perfectly fine and I remember when I had all of my money in a savings and checking account to. I didn’t start investing until I had saved at least 6 months worth of living expenses in my savings account. But now that I have more money I need to keep track of where it is all going. I came up with a conservative, moderate, and risky profile for myself. Currently I am in the moderate profile but I want to begin moving to the risky profile because I think it better suits me at this time.