Asset Allocation – Part 1: Risk Assessment
The premise of this article is that “Risk Assessment” is designed by the financial industry, and does not provide any useful indicator for the individual investor. I’ll argue that “Risk Assessment” has no bearing on proper Asset Allocation. Rather, your age is what should determine your investment risk. What is Risk Assessment? Mutual fund and insurance companies understand “risk assessment” very well. In fact they have it down to a calculated science, highly correlated with human behaviour and piles of statistics. For mutual fund dealers and investment advisors meeting with new clients, it all begins with the “Risk Assessment Profile” …