Understanding Risk: How Much Should You Really Take?
2025
Investment Fundamentals
Most investors think about returns. Smart investors start by thinking about risk.
Before you build a portfolio, you need to get honest about how much uncertainty you’re comfortable with. Risk isn’t just a number — it’s how your money reacts to the unexpected, and how you react when it does.
Let’s break it down.
What is Investment Risk?
At its core, risk is the possibility that your investment won’t perform as expected. That could mean anything from price drops to slower-than-expected growth — or even permanent loss in extreme cases.
But not all risk is bad. In fact, risk is what creates the opportunity for returns. No risk, no reward.
Different Types of Risk You Should Know
Here are some common types of risk you’ll encounter:
Market Risk: Prices fluctuate. Sometimes irrationally.
Inflation Risk: Your money may lose purchasing power over time.
Liquidity Risk: You might not be able to sell when you want.
Concentration Risk: Too much in one stock, sector, or country.
Behavioral Risk: You might panic or get greedy at the wrong time.
Each one can hurt your portfolio in different ways — and most portfolios face more than one type at once.
So, How Much Risk Should You Take?
There’s no universal answer. But here are 3 practical questions to guide you:
1. What’s your time horizon?
The longer you can leave your money invested, the more risk you can typically afford to take. Time helps smooth out market volatility.
2. What’s your financial goal?
Saving for a house in 2 years? That’s different than building wealth over 30. Match your risk level to the importance and timing of the goal.
3. How do you react to losses?
If a 15% drop would keep you up at night or make you sell everything, you may be taking on too much risk — even if it looks good on paper.
Finding Your Personal Risk Zone
We believe in risk-adjusted investing. That means we help you take just enough risk to meet your goals — no more, no less.
Inside the Portfolio Builder, you’ll be able to:
Set your risk comfort level (conservative, balanced, or growth)
Preview how your plan might perform in different scenarios
Adjust your allocation if needed — no guesswork required