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Featured Advisor



Srbo Radisavljevic
Managing Principal/Investment Advisor

Edge Portfolio Management

City:Northbrook

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, following Chicago sports, enjoying ethnic cooking, and serving as a school board member for Norridge School District 80.

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Risk Tolerance: Affluent Investors Think Moderate, but Investing More Conservatively

What are the more accurate gauges of an investor's risk tolerance?

| BY Donald Liebenson

How Affluent investors describe their risk tolerance is at odds with their investment philosophies and actual investments, according to new research from Spectrem’s Millionaire Corner.

In the midst of an improving economy and expressed cautious optimism that their personal financial situation will be stronger in the coming years, wealthy investors are nearly three times more likely to describe their risk tolerance as moderate (57 percent) than conservative or aggressive (20 percent each), according to a survey of 1,800 investors. But their investment decisions and portfolios reveal a more conservative mindset. Nearly half (48 percent) of Affluent investors surveyed said they are unwilling to invest in anything that would result in a loss of principal.

Similarly, many self-described aggressive investors follow a mixed approach to capital preservation and asset growth that puts them more in the moderate camp.

Regardless of how the Affluent define themselves, investors are more likely to consider the potential losses when making an investment decision rather than the potential gains (44 percent vs. 39 percent). Similarly, 40 percent of investors surveyed indicated they have moved mostly toward lower-risk investments within the last few years, while 46 percent said they have remained with the same asset allocation.

Affluent investors are not optimistic about short-term prospects for the economy. Fifteen percent believe it will improve in the next three months, while 23 percent forecast improvement in the next six months. Sixty percent believe the economy will be better in the next four years. Those with an expressed conservative investor mindset are more likely than their more moderate and aggressive cohorts to forecast that the economy will worsen over the next four years.

While nearly half (49 percent) of investors said that the economic crisis has not had an impact on their risk tolerance, 42 percent said they are not willing to take on more risk in their investments.

Wealth is not a primary indicator of risk tolerance. Surprisingly, Millionaire investors are more likely than non-Millionaires (26 percent vs. 14 percent) to identify their risk tolerance as conservative.

A more accurate gauge of risk tolerance, the survey found, is an investor’s time horizon, with timetables of one-to-three years and three-to-five years leading to the most conservative investments. An investment time horizon of more than a decade is linked to aggressive investors who can tolerate short-term fluctuations in value.



About the Author


Donald Liebenson

dliebenson@millionairecorner.com

Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.  

A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.