Make More Optimal Tradeoffs Between Investment Risk and Return

VeriPlan helps you make more optimal decisions about the tradeoffs between investment risk, investment return, and personal savings

Too often decisions about risk-adjusted investing and asset allocation are over-simplified with a few questions about your risk tolerance. Typically, this superficial process will be followed quickly by the offer of a canned, off-the-shelf asset allocation scheme and the attempted sale of costly investments to fill in the blanks of the proposed asset allocation.

In this process, people have no idea whether their investment strategy combined with their savings rate, might lead to the future that they desire. Furthermore, most people do not fully appreciate the tradeoffs between investment returns, investment risk, and personal savings rates that are implicit in any proposed asset allocation. When someone asks you a few questions about risk and labels you a “conservative,” “average,” or “aggressive” investor, you have no real idea about what the proposed investment plan may require you to endure over your lifetime.

In contrast, VeriPlan puts you in the driver’s seat by providing full control over assumptions about your income, expenses, debt, investment returns, and return variations or risk. VeriPlan provides five user adjustable asset allocation methods for you to experiment with, so that you can better understand the tradeoffs between different investment risk and return strategies. VeriPlan helps you to understand what it really means to be conservative or aggressive and how different asset allocations could affect necessary rates of savings and the variability of outcomes.

By allowing you to analyze these tradeoffs on your own PC, VeriPlan can save you a great deal of money in different ways. If you decide to take less investment risk, VeriPlan helps you to understand the required savings rate that would still meet your long-term goals. To the contrary, if you choose to take on greater investment risk, VeriPlan can help you to evaluate whether your current savings rate is higher than necessary and whether you could spend more money for current consumption. (See: VeriPlan helps you understand how your current savings rate affects your future financial goals)

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Tags: risk tolerance

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