How do you help me not to take too much risk or risk that won’t be appropriately rewarded?
Investing requires taking risk, but only up to a point. Gains grow your wealth, and losses erode it. The more risk you take, the greater the potential gains and the greater the potential losses. Some portfolios are so risky you can expect them to experience 2008 levels of losses with some regularity, and instead of growing your wealth, they are likely to shrink your wealth – or at least not reward you for all the risk you’re taking.
GuidedChoice was built with the consumer in mind and we know that 60.6% of participants with 401(k) or like accounts favor less risk over more reward. With GuidedChoice, we try to put various best practices and risk guards into place so that you are not “playing the lottery” with your retirement money. The mathematics of Modern Portfolio Theory (MPT) requires that you generate a frontier using expected returns. However once we have generated our returns, we calculate the implied growth rates of portfolios by considering their volatility. Before tailoring your investment portfolio, we determine the maximum risk level we will allow as the risk level of maximum growth, since beyond this threshold expected growth rates actually begin to decline. Learn more about our process here.