How should I align my risk tolerance with my goals?

Investment strategies are about aligning risk tolerance with your goals:

1. Short-term goals: necessitate lower volatility investments and lower risk because you don't have the luxury of time to recoup losses.

2. Mid-term goals: typically similar to the investment profile of your "short-term" goals. If you can defer this goal (a new purchase), perhaps you take a bit more risk. If you cannot defer this goal (a wedding), you don't want to be taking risk.

3. Long-term goals: this is where we take much higher risk for longer-term reward and we know that the price we pay for higher returns is substantial market volatility.

➡️ My clients and I often discuss how we can align their investments (risk) with their goals -- what can they handle, quantitatively (risk capacity)? And, what can they handle, emotionally/queasiness (risk tolerance)?