Let’s break it down ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ How much risk should I take? Hi there, If you’ve been with us for a while, you’ll know I talk about risk a lot. That’s because risk is one of the most important tools we have as investors, and determining how much of it to take on can make all the difference when it comes to achieving your financial goals. For our managed portfolios, we help determine that for you: we model the range of expected outcomes for each portfolio, which helps us determine the appropriate plan for every investor given their individual situation. This is why we ask you questions about your savings, your goals, and your time horizon when you sign up. Regardless of whether we help you invest or you manage your own portfolio, it’s useful to have a basic framework for understanding how much risk is right for you and your goals. Open a managed account Risk required is the amount of risk an investor needs to take in order to achieve their goals. For example, someone who is 30 years away from retirement and wants to maximize their wealth is probably looking for the highest returns possible. They can withstand some short-term volatility, and if ultimately the returns are at the lower end of their range of expected outcome, they’ll still be ok. They’d tend to require more risk. On the flip side, if an investor is working toward making a down payment on a house in a few years, and they’re on track to save most of the money they’ll need, they would tend to require a less risky portfolio. Risk capacity is the ability of the investor to take risk when considering factors outside of their investment goals. Take the retirement saver in the example above. Now let’s imagine they are the highest-earning member of their family and may occasionally need to use their savings to support their relatives. It’s important that that money is there when they need it; it can’t be unavailable just because their portfolio is down. Similarly, if the portfolio is down and they have to withdraw a majority of it, they’re greatly reducing the amount of savings available to build wealth. In either case, that lowers their risk capacity. Investors with high risk capacity tend to have enough savings and/or earnings to continue to invest when markets are down. Risk tolerance can be a little trickier to assess. It’s the ability of an investor to handle losses without making panic-based decisions. Someone with low risk tolerance, for example, may stop making regular paycheque contributions after a big downturn — or leave the market altogether. These types of decisions can hurt long-term outcomes. That’s why, ultimately, the best portfolio is the one you can stay invested in – even if it means taking on less risk than may otherwise feel appropriate. Having the confidence that you’re taking on the right level of portfolio risk for your goals can help you stay the course through difficult market conditions and ultimately help you achieve better investment outcomes. If you’d like some help with that — or anything else — please get in touch. All the best, Ben Reeves Chief Investment Officer Wealthsimple, 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 Privacy Policy Unsubscribe Replies to this email address are not monitored. Have questions? Visit our Help Centre or submit a request to our Client Support team. All information and commentary provided is for illustration purposes only and is not investment advice or recommendations. All investments involve risk. To get more info on our products, investment decisions, fee schedules, user testimonials, promos & more visit wsim.co/disclaimers. Managed accounts are offered by Wealthsimple Inc., a registered portfolio manager in each province and territory of Canada. Self-directed investing is offered by Wealthsimple Investments Inc. (WSII). WSII is a member of the Canadian Investment Regulatory Organization (CIRO). Customer accounts held at WSII are protected by Canadian Investor Protection Fund (CIPF) within specified limits in the event WSII becomes insolvent. A brochure describing the nature and limits of coverage is available upon request or at CIPF. © 2024 Wealthsimple Technologies Inc.