People invest in the stock market to make money. How they make it (if at all) is a different story. Determining clients’ risk tolerance is a key step in the financial planning process. The pandemic has given us new insight into what that means.
“I’m game for anything.”
You know people who were heading out to restaurants the moment outdoor drinking was a go. They got together with friends (discreetly) during the pandemic. Although travel was for essential purposes only, they were out to the grocery store every day.
Investing world: Some clients are aggressive risk investors. Hopefully they understand what they are doing, but they are ready to buy small-caps and options. They trade on margin.
What Your Peers Are Reading
“I’ll follow the rules, but interpret them myself.”
During the pandemic, they drew two lines in their driveway, about eight feet apart. They set up chairs and snack tables on either side. They invited one couple at a time over for cocktails. Later, they entertained indoors, but prepared individual plates of snacks. They greeted guests wearing masks, then took them off when distance was established.
Investing world: It’s a growth investor. They will take some risk, but not that much risk. It’s a calculated risk. They do the calculation, or accept your rationale why it’s a suitable investment. They buy into asset allocation and diversification.
“I’ll do what I’m allowed, but no more.”
You have friends who understand “bubbles.” This is limited to immediate family. No one else gets into the house. They will have meals together. If they venture out to a restaurant, it’s outdoor dining only. They are trying for life as normal, but taking baby steps. They wash their hands frequently, wear masks and keep the six-foot distance.