Your WEALTH MATTERS BLOG

As we have written in previous blog posts, risk is a broad measure that needs to be evaluated in the proper context. The overall risk is based on the combining effect of the various risk factors at play. When it comes to evaluating the overall risk tolerance of a client, we use a multi-pronged approach which goes beyond simply filling out a questionnaire.

Any time you invest money, you should be expecting some kind of return. The cost of this return is the risk that you’re taking: many investors would suggest that the greater the risk you take, the higher the return you should be rewarded.

Standard deviation, also known as volatility, tends to be a popular measure of risk because it can be easily quantified through historical return data. When investments are qualified on a spectrum of low to high risk, it is usually with respect to standard deviation. However, it is important to note that volatility is only one type of risk and evaluating an investment based on one risk metric alone does not paint a complete picture.