How do you know if you are taking the right amount of risks in your investment portfolio? This is a common quandary among our clients, because the “right amount of risk” for you today, can and will change in the future. Today’s episode will cover the many ways we assess doctors’ risk tolerance.

The ratio of stocks to bonds is what determines the risk tolerance ratio of your investment model. The cliff notes version is: stocks tend to be riskier than bonds. Stocks can produce higher losses and higher gains as they represent ownership in a company. Whereas, bonds are usually steadier as they represent “lended money” to a company or a government entity. Of course, as we all know, there is always risk involved in investing which is why knowing your risk tolerance is an important step in managing your money. The following questions help us, and our clients, select the correct investment model and risk level:

How soon do you plan on retiring?
- For those with decades until retirement, a riskier option is usually more beneficial. Market highs are great for quickly growing the portfolio. Since there is no need to access this money in the immediate future, if the market were to fall, there is still plenty of time to rebuild that wealth before retirement.
- There are some exceptions to this general rule. One of which is that many of our younger doctors like to start out investing more conservatively when they don’t have much capital. These younger clients then build their wealth and increase risk later into residency.
Do you pay attention to market fluctuations?
- Our goal is to provide doctors with More Time. More Money. Less Stress. This only works if our doctors are not kept up at night worrying about stock market fluctuations. If this is something that affects a client, we recommend a lower risk investment model. This way, even if the market is down, their loss will be relatively small.
- On the other hand, we have clients that never watch the market. They are more concerned about the bigger picture of their investment, so the daily fluctuations aren’t a bother. For these types of clients, we might suggest a riskier model.
Are you a risk taker in other parts of your life?
- Usually, what you are most comfortable with for investment risk falls in line with your risk in other aspects of your life. For example: do you put in a great amount of time researching a new vehicle? Do you have an emergency fund set aside?

Again, the right risk model for you is likely to change as things in your life change. We recommend looking at this annually with your financial advisor. The determination of what stage you are at (building wealth or preserving wealth), will help us decide your investment future. If you are a current MD Financial client and would like to discuss your risk profile, please do not hesitate to reach out at info@mdfinancialadvisors.com.

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Remember that you can send us any questions or potential topics at: Info@MDFinancialAdvisors.com

Katherine Vessenes, JD, CFP®, is the founder and CEO of MD Financial Advisors who serve 500 doctors from Hawaii to Cape Cod. An award-winning Financial Advisor, Attorney, Certified Financial Planner®, author and speaker, she is devoted to bringing ethical advice to physicians and dentists. She can be reached at Katherine@mdfinancialadvisors.com.