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Featured Advisor



Ed Meek
CEO/Investment Advisor

Edge Portfolio Management

City:Winfield

State: IL



BIOGRAPHY:
At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, playing and following basketball, playing golf, and participating as an advisory board member for Breakthrough Urban Ministries.

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How to Become a Millionaire: Factor No. 4 Risk Tolerance

Over the past few weeks we have discussed the common factors identified in Millionaires based upon extensive research with actual Millionaires and billionaires.  As noted previously, there are eight key factors that are found among almost all wealthy households, just to varying levels.  These factors include the following:

 

1.      Education

2.      Hard Work and Higher Average Hours Worked

3.      Business and Professional Practice Ownership

4.      Slightly aggressive risk tolerance….our topic for today

5.      Use of Professional Advisors

6.      Balanced portfolios that include alternatives

7.      Investment real estate

8.      Willingness to invest in new but well researched ideas and concepts

 

As mentioned above, wealthy households have slightly aggressive risk tolerance profiles.  This can be seen most clearly by the increased level of aggressiveness based upon wealth levels.  As you can see by the attached charts, 28% of households with over $25 million of net worth define themselves as Aggressive.  Fourteen percent define themselves as Most Aggressive.  About half consider themselves as Moderate.

 

Compare these numbers to individuals with less wealth.  Ultra High Net Worth investors, those with $5 million of net worth and greater, define themselves as Aggressive 20% of the time.  Millionaire households, those with $1 to $5 million of net worth, define themselves as Aggressive 16% of the time.  Finally, the Mass Affluent, those with $100,000 to $1 million of net worth define themselves as Aggressive only 14% of the time.

 

This is interesting to consider especially since the average age of households increases with wealth, with the exception of the $25 million plus households.  Most of the UHNW and a large portion of Millionaires are already retired….yet still aggressive.

 

It is easy to argue, however, that as wealth increases it is easier to be aggressive, and that is definitely true.  But when wealthy households are asked whether their investment risk tolerance and their risk tolerance in regard to other life events are similar, 51% indicate  they are similar in both life and investment decisions.

 

Keep in mind that these investors do not define themselves as Very Aggressive.  For the most part, they are primarily Aggressive or Moderate.  The oldest households tend to define themselves as Conservative.

 

Is should also be noted that Business Owners and entrepreneurs are generally the most aggressive as far as risk tolerance.