Balanced portfolios combine various asset classes and investment strategies to balance an appropriate level of risk with an acceptable level of return. These portfolios are typically comprised of a mix of equities (i.e. stocks) and fixed income (i.e. bonds). Historically, bonds have served three major purposes in balanced portfolios: diversification, capital preservation, and income generation.
Risk tolerance refers to the amount of loss an investor is prepared to take on when making an investment decision. Everyone has a different level of risk tolerance based on their personal financial situation and stage of life, and this level of tolerance plays a critical role in determining the allocation of your portfolio.
We get this question on a regular basis, usually when the stock in question has recently been in the news and has seen a meaningful move higher in price. When building portfolios, we choose high-quality companies with consistent and predictable earnings through a detailed evaluation process.
It is always the right time to revisit your investment strategy or asset allocation. In fact, we recommend that our clients meet with their advisor on a yearly basis, or following a lifechanging event, to revisit their risk tolerance, update their financial plan, and ensure they are still on track to achieve their goals.