How did you determine risk tolerance?

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Taylor Larimore
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Re: How did you determine risk tolerance?

Post by Taylor Larimore » Wed Jul 29, 2020 7:14 pm

"How did I determine risk tolerance?"

Easy Answer: Suffering through about a dozen bear markets. :(

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "An ideal asset allocation incorporates the two most obvious dimensions of investing: risk and return."
"Simplicity is the master key to financial success." -- Jack Bogle

Fallible
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Re: How did you determine risk tolerance?

Post by Fallible » Fri Jul 31, 2020 8:13 pm

Taylor Larimore wrote:
Wed Jul 29, 2020 7:14 pm
"How did I determine risk tolerance?"

Easy Answer: Suffering through about a dozen bear markets. :(

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "An ideal asset allocation incorporates the two most obvious dimensions of investing: risk and return."
+1

Taylor, if you don't mind my asking, did the many bears tend to show you most often with high, moderate, or low risk tolerance? The reason I ask is because my own tolerance varied somewhat with each bear.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle

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Taylor Larimore
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Re: How did you determine risk tolerance?

Post by Taylor Larimore » Sat Aug 01, 2020 10:04 am

Fallible:

My risk tolerance has definitely increased until now I scarcely notice bear markets and corrections.

Here is a good rule of thumb about asset-allocation that lets me sleep well: Keeping my cash and bond allocation in the amount that I cannot afford to lose.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Choose a balance of stocks and bonds according to your unique circumstances--your investment objective, your time horizon, your level of comfort with risk, and your financial resources."
"Simplicity is the master key to financial success." -- Jack Bogle

flaccidsteele
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Re: How did you determine risk tolerance?

Post by flaccidsteele » Sat Aug 01, 2020 12:31 pm

Taylor Larimore wrote:
Wed Jul 29, 2020 7:14 pm
"How did I determine risk tolerance?"

Easy Answer: Suffering through about a dozen bear markets. :(

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "An ideal asset allocation incorporates the two most obvious dimensions of investing: risk and return."
Is that risk tolerance or volatility tolerance?

Bear markets offer some of the lowest risk opportunities for deploying capital
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

2marshmallow
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Re: How did you determine risk tolerance?

Post by 2marshmallow » Sat Aug 01, 2020 12:36 pm

MissHavisham wrote:
Fri Jul 24, 2020 8:24 pm


Also, In January of this year I had $25,000 and due to Covid it dropped to $13,500. Now it's back up. They say smooth seas never make a skilled sailor. Am I a sailor now? Was COVID a big enough experience for anyone? For high net worth people, does losing $100,000's feel the same way as losing +/-

Probably the biggest advancement I made in my investing lifetime is to never phrase the question the way you have. Specifically, the word, "losing" does not apply if you don't sell at a reduced portfolio value. Without selling and locking in the loss, what you see on your statement is only a temporary reduction in portfolio value. If you don't need the money and are in it for the long haul, you can be confident that it will rebound someday and the reduction in value will be temporary. Our portfolio reduced in value by $300K at the Covid nadir, but we did not lose anything because we did not sell anything. In fact we continued regular buying at reduce prices. With that mindset, market declines are not scary at all.

Good luck,
2marshmallow

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dogagility
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Re: How did you determine risk tolerance?

Post by dogagility » Sat Aug 01, 2020 12:43 pm

MissHavisham wrote:
Fri Jul 24, 2020 8:24 pm
Curious.
I looked at the history of the S&P500 total return since 1877 (log scale helps). I noticed a continued upward trajectory. I looked at my investing of timeline 60+ years, if I'm lucky. Thought to myself... what's all the angst about short-term downturns?

Decided on 100% stock AA for 2+ decades, and this has turned out to be a great decision for my portfolio.

It helps that I tune out the financial news noise at all times and that I am confident in my asset allocation decision... keeps me from panic selling.
"The stock market is a device for transferring money from the impatient to the patient" -- Warren Buffett

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Re: How did you determine risk tolerance?

Post by Fallible » Tue Aug 04, 2020 5:14 pm

Taylor Larimore wrote:
Sat Aug 01, 2020 10:04 am
Fallible:

My risk tolerance has definitely increased until now I scarcely notice bear markets and corrections.

Here is a good rule of thumb about asset-allocation that lets me sleep well: Keeping my cash and bond allocation in the amount that I cannot afford to lose.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Choose a balance of stocks and bonds according to your unique circumstances--your investment objective, your time horizon, your level of comfort with risk, and your financial resources."
And I think these go hand in hand: learning the right lessons from those tough bear-market experiences. It's a good example for the OP, along with good advice in Jack's quote above. :thumbsup
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle

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