A deep understanding of your investing goals, how long you have to meet your goals and your comfort level with risk are all part of determining the right mix of investments for you.
Knowing how you may react to the ups and downs of the market is important because, all too often, the reactions to swings in value, not the fluctuations themselves, have the biggest impact on successful long-term investing. Your answers to the following questions will help you better understand your comfort level with risk.
In addition, we'll consider:
- How much risk you can take, based on your investment time horizon and other factors.
- How much risk may be necessary for you to take to help you reach your goals.
After assessing your comfort level with risk, aligning your risk tolerance with your goals, time horizon and return expectations, you'll better understand how to develop an appropriate investment strategy and make adjustments over time as needed. A clear understanding of these can help you avoid what may be the biggest risk of all: not achieving your long-term financial goals.
Before you complete the questionnaire
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Edward Jones has identified five investing stages of life: three "accumulation" phases for investors saving for retirement and two "distribution" phases for those in retirement. Consider which stage you fit into.
- Accumulation stages: These are critical in building necessary wealth, considering most investors will likely spend more than 20 years in retirement.
- Early Investing Years – 26+ years until retirement.
- Good Earnings Years – 16 to 25 years until retirement.
- Higher Income and Savings Years – 15 years or less until retirement.
- Distribution stages: Many investors will spend as much time in retirement as they did during their accumulation years. We separate the distribution years into Early Retirement Years and Late Retirement Years. In terms of defining "early" versus "late," think in terms of how many years left of retirement you have. Of course, there are many important considerations when estimating the number of years you'll need when your distributions begin, including your health and the longevity of your family members.
- Early retirement years – Expect to spend 10+ years in retirement.
- Later retirement years – Age 80 or older and/or expect to spend 10 years or less in retirement.
After you complete the questionnaire
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Be sure to consider any factors that may cause you to adjust the Portfolio Objective suggested for you, including your:
- Current and future income needs.
- Amount of existing savings.
- Investing time horizon.
- Estate planning considerations.