Kiplinger

The Social Security Mistake Risk-Averse Folks Make

It has become standard practice that risk tolerance questionnaires are completed for almost every client during a financial planning or investment planning process. Risk tolerance questionnaires serve two purposes:

  1. Bluntly speaking, it is a "COA" instrument -- which stands for a "cover our..." (You can fill in the blank.)
  2. Partially driving No. 1 is the belief that a client's plan should be built around his or her unique situation and risk tolerance level.

While I have been outspoken about the usefulness -- or lack of usefulness -- of many risk tolerance questionnaires, understanding a client's risk tolerance level or risk aversion is valuable because people react differently when information is presented as a loss or a gain.

You’re reading a preview, subscribe to read more.

More from Kiplinger

Kiplinger5 min read
4 Steps for Managing Income Withdrawals in Retirement
If you’re like most Americans nearing retirement, you’re worried about whether you have enough savings. In fact, only 22% of those approaching retirement believe they’ve saved enough to retire comfortably. At a time when the stock market is down, inf
Kiplinger12 min read
The Best Travel Rewards Credit Cards
Whether you travel often or just take the occasional vacation, a travel rewards credit card can be an excellent companion. With every purchase, you can use a good travel card to collect points or miles that are redeemable for flights, hotels or other
Kiplinger3 min read
19 Best Stocks to Buy Now for High Upside Potential
If the goal is to find stocks to buy when prices are lower rather than higher, it stands to reason that the time to go looking for the best stocks to buy is right now.  After all, the market is off by more than a fifth so far this year, which means i

Related Books & Audiobooks