I recently hosted a seminar designed to give women the tools they need for financial empowerment. While speaking with these women I was reminded that one of the biggest barriers to women feeling confident about their financial strategies was in understanding what type of an investor they are. We each have our comfort zones, and those that just make us question everything we do. In order to understand how you should manage your finances, you first need to understand what kind of an investor you are. In short – what is your risk tolerance?
One way to look at your Risk Tolerance is your emotional and financial capacity to ride out the ups and downs of the investment market without panicking when the value of investments goes down.
Where do you fit? See if one of these “Financial Personalities” matches you:
- Are you a Relationship Rosa? Rosa has a high risk tolerance, but is not very involved in her financial planning. She focuses on her family and loves talking about the adventures of her life. If you are a “Relationship Rosa,” you trust fully the decisions being made on your behalf. When it comes to financial matters, Rosa is easily influenced by others in her life. She therefore needs to align herself with financially astute advisors and family that she trusts.
- How about a Powerbroker Pam? Pam has a very high risk tolerance but is willing to back it up with a very high involvement level. She wants to be in control and take charge. She is very direct, and is very knowledgeable about financial planning and finances in general. Pam is not likely to be easily influenced by those around her – and is more than willing to do her homework to make the right decisions.
- Or does a Traditional Tess describe you better? Traditional Tess has the lowest risk tolerance level and also has the least interest in being involved in the financial planning process. Tess has a high fear of change. Tess wants to trust those around her but will do so only after they have proven themselves to be in her corner.
- And then there is a Deliberate Dee. Deliberate Dee is on the low end of the risk tolerance spectrum but does want to be highly involved in her financial planning. Dee is already somewhat knowledgeable but will also continue to research and learn. Dee needs to feel safe in who she aligns with and when she is – is willing to take on some risk.
Understanding your financial persona will give you great insight into what types of investment strategies to employ in setting yourself on the path of financial freedom.
