3 of 5
BACK NEXT
Risk manager
Roy Diliberto
Philadelphia, PA


Recently, a new client who was retired told us that he wanted little or no risk in his portfolio. His portfolio was with a major brokerage firm and his broker had constructed a portfolio of bonds and no stocks. The client told us that he did not want any of his money invested in stocks because he could not handle the risk.

We counseled him that he may have meant "fluctuation," not risk. Risk, we told him, was running out of money while you are alive, and our long-term projections demonstrated that he was on target to run out of money in 12 years. We asked him if this was a risk he was willing to take, or would he be willing to accept some fluctuations and years when the portfolio lost money in order to significantly increase his chances for success.

The result was a balanced portfolio of 50 percent equities and 50 percent fixed income. Will he fret over fluctuations? In the short run, probably. In my opinion, financial advisers place too much emphasis on "risk tolerance" when portfolios are being designed for clients, and in many cases sacrifice the long-term financial welfare of their clients.

NEXT: Family business
Last updated June 11 2008: 7:16 AM ET
How to hire a financial planner The Pierponts sought an advisor they could grow with. After a few tries they found someone they could trust like a member of the family. (more)
Fortune 40: Stocks to retire onOur trademark long-term portfolio can help put you on the road to a secure future. (more)
Ultimate mutual fund portfolio If you crave diversification, stability, and results - but you'd rather leave the hard work to a savvy pro - this collection is for you. (more)

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.