Periodically reviewing your investments to help ensure they are on the right track is an important and meaningful measure in working toward your financial goals. Here is a simple but valuable way to get more from your investment strategy. When your next brokerage statement arrives, check your account profile to make sure that all the sections are accurate and up to date. This includes your investment objective, risk tolerance, and time horizon.
Investment objective. Focusing on your investment objectives helps your financial advisor align the other parts of your investment strategy – risk tolerance, time horizon, and liquidity needs – appropriately. Asset allocation models are grouped within three overarching portfolio orientations:
Income: Portfolios that primarily seek current income with minimal consideration for capital appreciation. They usually have less exposure to historically more volatile growth assets.
Growth and Income: Portfolios that seek a blend of current income and capital appreciation. They usually have some exposure to historically more volatile growth assets.
Growth: Portfolios that primarily seek capital appreciation with minimal consideration for current income. They usually have significant exposure to historically more volatile growth assets.
Risk tolerance. Many investors differ when it comes to factoring risk into their investment strategy. Each investment strategy should include an appropriate mix of investments, based on the client’s objectives. Risk tolerance is the amount of risk you’re willing and able to accept in order to pursue your financial goals. Risk tolerance should be viewed along the following continuum:
Conservative investors accept the lowest amount of risk.
Moderate investors seek a balance between stability and appreciation in their portfolio.
Aggressive investors accept a higher risk for losses while seeking greater potential for returns.
Time horizon. How long do you plan to invest before you’ll need the money? The answer, of course, depends on your stage in life and your goals. Your time horizon is the expected number of months, years, or decades you plan to invest toward your financial goals. Time horizon is generally expressed as:
Immediate – Less than 1 year
Very short-term – 1 to 3 years
Relatively short-term – 3 to 5 years
Intermediate – 5 to 10 years
Long-term – More than 10 years
When checking your portfolio’s alignment, it’s also a good idea to make sure you’ve accounted for your liquidity needs. Liquidity need represents the extent to which a customer desires the ability or has financial obligations that dictate the need to quickly and easily convert to cash all or a portion of an investment. For reference, cash is the most liquid asset, while real estate, fine art, and collectibles are all relatively illiquid. Liquidity needs include:
Significant (primary need is liquidity)
Moderate (may need quick access to cash)
None (have other sources of cash)
When building your portfolio, it’s important to evaluate whether your current plan is aligned with your current goals and risk tolerance. Talk with your financial advisor to help ensure your strategy is on track to achieve your goals.
Our firm does not provide legal or tax advice.
This article was written by Wells Fargo Advisors and provided courtesy of Richard Zangara, Senior Vice President in Warren. Richard can be reached at 908-542-0348. Visit Richards's website at
Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.