top of page

charts and graphs

In investing, risk tolerance is a phrase used to describe how much an individual is willing to see their account fluctuate, due to the amount of exposure one has in the stock market.

As most people know, the stock market is unpredictable and has many ups and downs. Many people react to those ups and downs differently. Therefore, risk tolerance is unique to each person.

There is a sliding scale to risk tolerance. One can invest 100% in stocks/mutual funds/Exchange Traded Funds (ETFs), which is the most aggressive form of investing. Next, someone could invest their money in 100% bonds, which is the most conservative form of investing. And lastly, they could also do a moderate approach where there are some stocks and some bonds; this mix and matching could be somewhat aggressive or somewhat conservative, depending on the allocation between stocks, bonds, and held cash.

Conservative Investing

Conservative investing is for those who have the lowest risk tolerance possible. These are the people who are most reluctant to invest at all and would most likely choose to have their money in their mattress. Money is very emotional for this group, and seeing any drop in the original investment amount is a calamity.

Luckily, if you feel as though that is you, there are options out there.

When risk tolerance is non-existent, or no risk tolerance, then there are a couple of options. The first is an all-bond portfolio. A company, a municipality, a state, or even the federal government, will agree to pay you back your money plus some extra after a certain amount of time. This grows your account at a slow but reliable pace, although bonds do still fluctuate in value. The other way is to keep it invested in a money market account, such as the Schwab Money Market fund.

Money Markets are extremely safe investments; however, when something is safe, the investor loses out on higher potential annualized returns.

Middle of the road

Investing moderately is another tactic. Many people want some portions of their money safer, and other portions with the potential for higher annualized returns. The level at which people want that depends entirely on their risk tolerance.

We have numerous clients all over that sliding scale. When describing this allocation, we say things like 90/10, 50/50, 80/20, etc. The first number represents the percentage of held stock/mutual funds/ETFs in a portfolio, and the second number represents the number of held bonds/money market funds in a portfolio. When it comes to mixing and matching in a moderate portfolio, it is important to understand this concept.

For someone with a 90/10 portfolio, we would still generally consider their risk tolerance to be aggressive. As that first number goes to 80, 70, or even 60/40, that is more moderately aggressive, because there are more stocks than bonds. As soon as the number is even, a 50/50 portfolio, is perfectly moderate. As bonds take up more space than stocks in a portfolio, we go to moderately conservative, all the way back down to conservative.

Mixing and matching these allocations is a very popular practice in investing for a couple of reasons. First, it keeps a portion of your money safer and always potentially increasing. And secondly, it usually causes greater diversification in a portfolio.

Aggressive Investing

Aggressive investing is a fantastic way to invest. This is for people who see the stock market as it is and understands it has ups and downs, and in the long run, are exposed to the highest potential annual returns than anyone else. The stock market since its inception has produced around 9-10% annualized returns on average.

For those with a high-risk tolerance, being in a heavily-weighted stock/mutual fund/ETF portfolio is the perfect thing. While invested, these people will see account drops of 25-35% in some years, while also reaping the benefits of riding that rollercoaster all the way back to the top with 25-35% gains in some years. Again, this isn’t typical, but as long as your risk appetite logically understands that this could happen, in the long run, an aggressive investor will always have higher returns in their portfolio. Again, the average return of a stock market portfolio is 9-10% each year compounded.

Having an advisor walking you through the emotion and logic of the stock market, and how your money could potentially be invested is a very important first step when determining your risk tolerance. Everyone is different, and there is something out there that meets your needs emotionally and logically.

The power of speaking with your advisor

As overwhelming as the stock market, timing, capital losses, and more can become, always feel free to use an advisor you know to just ask questions. It is our passion to help people understand these topics.

When it comes to the life work of our clients and prospects, no decision is ever taken lightly. No account value is disregarded because all concerns and questions hold such a heavy weight in a time like this.

We hope you’ve learned a great deal from this article, and more importantly, reduced some stress from your life today.


December 8, 2022

Drew Hodgson

Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm.  The information presented is for educational purposes only and intended for a broad audience.  The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed.  Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner. 

Whitaker-Myers Wealth Managers is not giving tax, legal or accounting advice, consult a professional tax or legal representative if needed. 

Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

Understanding Net Unrealized Appreciation (NUA) in Retirement Plan Rollovers


Understanding Net Unrealized Appreciation (NUA) in Retirement Plan Rollovers

Monthly College Planning Update: September 2023


Monthly College Planning Update: September 2023

The Market Based Argument for Dave Ramsey's Four Categories


The Market Based Argument for Dave Ramsey's Four Categories
bottom of page