This image encapsules three of my favorite things in life: the movie Mean Girls, Finance, and @MrsDowJones.

If you haven’t watched Mean Girls, I HIGHLY recommend. In fact, it should be required viewing.

If you don’t follow @MrsDowJones on Instagram, you are missing out on quality content.

And if you don’t understand your Risk Tolerance and Risk Capacity, we need to have a conversation.

There is a difference between Risk Tolerance and Risk Capacity:

Risk Tolerance is the amount of risk you feel comfortable taking.

Risk Capacity is the amount of risk you can handle financially.

For the past 10-ish years, the financial markets have been in a strong Bull market and investors rarely even noticed when there were pull backs (not including March 2020, which everyone clearly noticed). But we all know trees don’t grow to the sky – there’s going to be times when the market enters correction territory.

And we are here.

With inflation clocking in around 7.5%, the Fed is going to have to act to raise interest rates – likely higher and quicker than most people think. With this, in my opinion, it is likely we see another 5-10% pull back in the financial markets.

If the volatility that we have seen thus far in 2022 has made your stomach weak and kept you up at night, its time to revisit your risk exposure. Risky investments may provide opportunity for greater return than the market - you’ve heard the saying – the greater the risk the greater the reward, aka “you have to risk it for the biscuit”. Okay, but what a lot of people choose not to acknowledge when it comes to investing, is that the bigger the risk the bigger the potential downside as well.

Risky stocks are inherently more volatile, meaning their prices move up and down in larger intervals and quicker than a less risky stock. So, while you have great upside potential, you also have great downside potential.

It all comes down to YOUR personal risk tolerance and risk capacity.

Ask yourself “if this money were to decrease by 20% tomorrow, would that make me want to throw up?”.

If the answer is yes, you may need to make a change!

I am interested in your thoughts, comments, and questions!

Respectfully,

Brittany N. Jarocki, CFP®

CERTIFIED FINANCIAL PLANNER™ Professional

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  Investing involves risk. Loss, including loss of principal, may occur. No strategy assures success or protects against loss. All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.