Stock market

Protecting Yourself From Risk

As we’ve talked about before, investment risk is a risk that everyone shares. Having a portfolio of products aligned with your risk tolerance and time horizon is important to protect against market risks. As you age, your time horizon and risk tolerance will most likely change. It is important to review the time horizon associated with each of your goals, and evaluate your true risk tolerance. 

One way of evaluating your risk tolerance is the Rule of 100. The Rule of 100 can be used to determine the percentage of investments in your portfolio that should be riskier in nature. Your Rule of 100 calculation is your age subtracted from the number 100, and the difference is the percentage of risky investments. For example, if you’re 63 years old, 100 – 63 = 37, so 37% of your portfolio can be put into more risky investments. In contrast, the remaining 63% should be kept in more secure accounts. This rule is based on the idea that the older you are, the less time you have to recoup in the event of a loss, such as a stock market drop. 

“stock market sell-offs have been pretty lackluster in 2021,” says a recent article. It may be time to reevaluate your risk tolerance. Read the full Forbes article to learn more. 

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