Buckle Up, Buttercup! Volatility & Risk Tolerance

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At OLV Investment Group, we have had the pleasure of hiring an international intern who is attending the University of Michigan. Muhammad Ammar is hardworking and eager to learn. In fact, when asked during his first week if he was willing to work an unscheduled, 13-hour day, he jumped at the opportunity. This very long day included an hour-plus drive to our Livonia office where we had a seminar regarding risk tolerance and tools we utilize when determining how much risk a client is willing to take. During the 60-minute trip to Livonia, I may have accidentally driven significantly above the speed limit. We were engaged in fun conversation regarding cultural differences and politics. Our intern, who has asked to be known as Ammar, his given name in Dubai, was very engaged in our discussion when I received a phone call from my business partner. We had been talking on the phone for a few minutes when a sea of red brake lights lit up both of our faces. Looking at the speedometer, I realized that I was driving in excess of 85 MPH. As I hit the brakes, phone in hand, Ammar let out a very small shriek as he realized the seriousness of the situation. He was genuinely afraid that he was about to be involved in a high-speed auto accident. But, the car was very much under control, as that is the type of traffic I often experience during my business excursions.

This is a perfect analogy when thinking about the level of risk that any given client is taking with their investment portfolio. Truly, as long as traffic is moving swiftly and there are no accidents, most people love moving quickly on the expressway … heck, that’s why it is named the expressway. Same thing typically goes for the stock market. When things are moving swiftly higher, like they did last year as measured by the S&P 500, everyone loves the ride up. It’s very comfortable cruising at 80 MPH and just like with the stock market, when it’s rising quickly, we all can get to our destination quickly. Driving fast on the expressway and being in a very heavily stock-weighted portfolio, although exhilarating at times, can also end up creating moments of near panic and may cause inexperienced drivers/investors to make potentially poor decisions and end up in dire circumstances. Volatility in the stock market often, just like abrupt changes in traffic patterns, can happen in the blink of an eye. Some people, like myself, are willing to take the risks of driving faster and understand that there may be some close calls. For people newer to expressway driving, like poor Ammar, the constant speed changes and weaving in and out of traffic can be quite unnerving.

When it comes to taking risks in your investment portfolio, determining your risk tolerance is not really about how much you like to make money as much as it’s about how miserable you feel when you lose money. A good rule of thumb may be that if you can’t go on a family vacation without checking on your portfolio, you may be overexposed to risk. There are many great tools available to investors to determine the level of volatility they can handle. Our firm has multiple new tools that we consider to be cutting-edge. Make sure you consult your financial advisor regarding the speed at which your portfolio is moving, and whether that still lines up with your goals and your tolerance for sudden traffic jams. As a public service announcement: arrive alive! Don’t for get to buckle up while doing your summer traveling.


800.338.4586 olvinvest.com The Durant 607 E. 2nd Ave., Suite 100 Flint, MI 48502 jlagore@olvinvest.com
Securities offered through Sigma Financial Corporation, member FINRA/SIPC.
Investment advisory services offered through SPC, a registered investment advisor.
OLV Investment Group is independent of Sigma Financial Corporation and SPC.

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