What About Risk?
 Everyone
feels differently about risk, especially when it comes to money.
Some people like high risk. Some people like low risk.
Our passive asset class funds give you the opportunity to balance
your portfolio with the right mix of high-and low-risk investments
for you.
Why Risk Is
Important
In order to be successful with your long-term investment goals, you
must understand the level of risk you best feel comfortable with.
When you feel good about the level of risk in your investments, you
have a better chance of being successful in your long-term financial
goals.
We base our long-term investment plans on a risk assessment process
that considers your (1) willingness, (2) ability and (3) (perhaps
most important) need to take risk. Once we identify your personal
level of risk, we then use that assessment to develop a written
Investment Policy Statement.
How We
Assess Risk
Before we do anything else, we get to know you. Our Financial Risk Tolerance
Questionnaire is an easy process for understanding your willingness
to take investment risk. You should be able to pass the “sleep well”
test by answering the question, “How much of my portfolio could
I lose before I would start to also lose sleep?”
Next, we assess your ability to take risk. We accomplish this
through discussion and dialogue where we ask questions regarding the
stability of your income, your investment time frame (aka investment
horizon) and what your planned purchases and expenses will be in
each of your investment pools. For example, investments with a short
horizon (i.e. savings for a home purchase) have a greater risk that
the unexpected will happen in the equity market. Therefore,
investors with long horizons have a greater “ability” to take risk
and can thus allocate greater percentage of their portfolio to
equities than those investors of shorter horizons. Also, your
sources of current income can have a great impact on your ability to
take risk. For example, a tenured professor is likely to have
relatively greater income stability than might a construction
worker.
Finally, we assess your need to take risk. We accomplish this by
determining the rate of return required for you to achieve your
financial objectives. Accordingly, we will learn what you want to
achieve financially and what you plan to do! The greater the rate of
return needed, the more equity risk you need to take. We will also
help you understand the “marginal utility of wealth.” This is
defined as the point at which incremental wealth is not worth the
risk required to achieve the greater expected return. We understand
that more money is generally better than less, most people can
recognize a point at which their lifestyle becomes comfortable.
The Financial Risk
Tolerance Questionnaire
The simple Financial Risk Tolerance Questionnaire will gauge your feelings
about the level of risk in your investments. The twenty-five
questions will probe your comfort level with other major purchases,
such as your house.
The questionnaire will help you to define the baseline of your
investment plan. It can also help you see where your ideas about
investing might differ from those of a business partner or spouse.
A Trusting
Relationship
We take the information that you provide to us in the Risk
Assessment Process, and use that to create an award-winning,
research-tested investment strategy that is right for you, and your
risk tolerance. We strive to help you develop an investment plan
that will meet your personal financial goals.
Because we only charge an annual fee based on your total portfolio
value, rather than a commission on assets that we buy or sell, our
interests are aligned with yours. That’s why so many of our clients
enjoy a trusting relationship with us.
The Cornerstone Difference
/
Our Process
/ The Role of Risk
/
Investment Policy Statement
Effective Tax
Planning /
Time to Rebalance /
DFA Funds
/
Efficient Market Theory
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