You can begin your planning exercise with a Constancy-designed questionnaire that seeks to gain insight into your financial circumstances and your experience and personality as an investor. The purpose of the survey is to gauge your ability to take on risk (uncertain outcomes), in particular volatility (near-term changes in the market value of your financial assets).
As you work through putting together an investment approach well-suited for you, there are objective criteria to consider, such as the time frame for your goals and the stability of your overall financial circumstances. As importantly, there are subjective considerations—your “investor temperament” as I call it—that impact your ability to stick with it. A well-designed investment approach moves away from the “objectively ideal,” as needed, so that you might better remain within your emotional comfort zone during the stretches of market adversity you will surely face. The results of this questionnaire are thus a key input in a goals-based asset allocation framework—in selecting model portfolios that best suit you and your goals.
I have spent a lot of time talking about the role of emotions in investing and offering perspectives to help you manage these emotions. I hope this helps, because in the realm of investing, the more you can hold your emotions at arms’ length, the better. If you have the time frame and are in a financial position to tolerate more volatility, and have the temperament to match, then you can reach for greater return. The reality is, though, we all have different emotional make-ups. And if your experiences and personality suggest you have difficulty staying the course during market declines, then it is best to acknowledge this and take it into account in your investment approach. So, I strongly encourage you to look inside yourself honestly and answer the questions as fairly as possible. Enjoy!