Are You a Risk Taker?

Physician's Money Digest, August31 2004, Volume 11, Issue 16

Just as doctors are familiar withpatients who fudge their personal healthhabits, financial advisors face the sameproblem with clients who exaggeratetheir risk tolerance. When the marketactually plunges, most investors havemuch stronger emotional reactions thanthey thought they would when they weresitting in the comfort of their advisor'soffice. That can lead to dumping stocks atfire-sale prices when holding on would bea smarter move. The solution may lie in apsychological compromise, especially ifyou think you need the higher yields thatriskier investments may provide to reachyour financial goals. In that case, youmay need to lower your financial targetsto allow for less volatile investments.