Determining the Right Risk Level for Your Investment Portfolio

Almost none at all. Or considerably more than that. It just depends. In the same way that we wouldn’t presume to be able to guess what style and size eyeglasses you should order without having laid eyes on you, it’s impossible to say what level of risk your portfolio should have without getting a lot more information. How old are you? Are you investing for retirement, or something else?

It’s best to back into the issue of risk by first establishing your plans for your money. If you anticipate you will have a need to access your money fairly soon — like in under ten years time — it’s best to consider a conservative portfolio, which will naturally favour more stable bond investments over more volatile equities. Wealthsimple’s conservative portfolio features a ratio of 70/30 bonds to equities, to encourage stability with a modest return. If you have a horizon of more than ten years and can stomach a little short-term volatility in exchange for bigger long term gains, we’d recommend a growth portfolio; ours features a mix of anywhere from 75/25 to 90/10 percent equity-to-bond ratio, the higher equity mix representing the maximum risk we’d recommend. Those with a time horizon that’s on the bubble between long and short (or just like to emulate Goldilocks’ philosophy on porridge temperatures when approaching every life decision) might consider a balanced portfolio, which features about equal parts bonds and equities, providing not-too-shabby returns for those with a low to medium risk tolerance.