Why Risk Tolerance Should Change Over Time
When people hear the phrase risk tolerance, they often assume it’s a fixed personality trait. You may have considered yourself more conservative, aggressive, or somewhere in the middle when it comes to investing. But in reality, your investment risk tolerance isn’t something that stays the same forever. In fact, it can change much faster that most people realize.
Risk Isn’t Just About the Market
A lot of investors think risk is only about whether the stock market goes up or down. However, true investment risk tolerance is much more personal than that. It’s about your life. Your age matters, of course – but so do a dozen other things:
- Changes in income
- Marriage or divorce
- Having children
- Career changes
- Starting a business
- Receiving an inheritance
- Approaching retirement
Even something as simple as a larger monthly mortgage payment can change how much financial risk feels comfortable.
The Portfolio That Fit You 10 Years Ago Might Not Fit Today
This is one of the biggest mistakes we see. Someone builds an investment portfolio in one season of life, then never updates it. But life changes quickly. The portfolio that made sense when you were 30 and single may not make sense at 40 with three kids and college planning around the corner.
On the other hand, someone whose income has increased significantly may actually have the ability to take on more investment risk than they could years earlier. That’s why ongoing conversations with your advisor matter. A good investment strategy shouldn’t stay frozen while your life keeps evolving.
Time Horizon and Emotions
One of the biggest factors in determining investment risk tolerance is time. Generally speaking, the longer you have until retirement, the more investment risk you may be able to take. Time gives your portfolio the opportunity to recover from short-term market declines. Someone in their 30s or 40s typically has decades for investments to grow, compound, and rebound through different market cycles.
Alternatively, someone approaching retirement may need to become more protective of the assets they’ll soon rely on for income. That doesn’t necessarily mean avoiding growth altogether – but it often means re-evaluating how much risk makes sense in your stage of life.
Naturally, emotions can still run high during market volatility. Even long-term investors can feel uneasy during difficult periods. But understanding whether time is on your side can help guide your investment decisions more rationally.
Risk tolerance isn’t just about how you feel about the market. It’s about how much time your investments have left to work for you.
Why Regular Reviews Matter
As mentioned above, major life events can have a huge impact on your investment risk tolerance. When these events happen, it should trigger investment conversations with your advisor.
Unfortunately, many people go years without reviewing whether their portfolio still aligns with their goals, lifestyle, or comfort level. That can create problems in both directions:
- Taking far more risk than necessary
- Being too conservative and missing growth opportunities
A thoughtful investment strategy evolves alongside your life, not just the market.
Where This Fits In
At J Benjamin, we believe investment planning should be personal. As life changes, your portfolio may need to change, too. Managing risk isn’t about guessing what the market will do next. It’s about making sure your investments still fit you.
Contact us today to begin reviewing your portfolio and risk tolerance.