Not every person can be an investor in risky assets (stocks and bonds). Some people don’t even need to be an investor. These lucky people have very large savings accounts or inherited assets and know that under every future scenario there financial goals will be met. There are also people who become very uncomfortable knowing that they have invested in a security that can potentially go up or down. This second group of people is described as not having an “appetite” for risk. For the majority of us we need to increase our net worth to meet a long-term goal such as; retiring at a reasonable age, generating income, maintaining purchasing power, increasing wealth, or providing for future generations. But first, we need to find our point on the risk line.
- There are several ways to achieve long-term financial goals. The first two involve a lifestyle change. For non-investors they can achieve their financial goals by saving a lot more or spending a lot less. Both options require current sacrifice and can take a very long time.
- Clearly, investing can provide the ability to meet long-term financial objectives by rechanneling current savings and maintaining a consistent lifestyle (assuming each person is a net saver).
- Once a person is confident that they can comfortably accept volatility for greater wealth accumulation they still have to determine their point on the risk line. There may even be a spot on the risk line for non-investor (T-Bills and Bank CDs). Some investors can “eyeball” the risk line and determine what mix of risk and return is best for them. Others may benefit from some professional guidance. This can come in the form of a financial plan or risk tolerance assessment. Understanding your true time horizon is also critical.
- If an investor has the right spot on risk line they will stay invested forever and can comfortably grow their wealth. Negative investment experiences are often the result of not truly knowing your point on the risk line.
- D’Arcy Capital can help you find your point and has the expertise and strategies to help you achieve your long-term goals. Once your point is determined, D’Arcy Capital can manage your portfolio to optimize the outcome and stay committed to your individual risk point.