How Much Risk Should You Have in Your Portfolio?

“How much risk should I have in my portfolio?”

This might be one of the most asked questions we hear. And honestly it can be a challenging one to answer because the right  response varies widely depending on your age, debt, funds saved for retirement, and more. What may be true for one person may not be true  for another.

We aren’t going to leave you hanging, though! We have a few principles that may give you a general sense of how much risk you may want to consider having in your portfolio. Just remember that it is always a good idea to speak with a financial advisor about your specific situation before you make decisions about your finances.


What is risk in investing?

Risk is the potential an investment has to differ from the intended outcome. The intended outcome is how much of a return you anticipate based on your initial investment and any additional contributions you make. To put it simply, risk is the chance that you will either not make any money or end up losing money on your investment.

Risk and investments go hand-in-hand. There are no investments that are without risk. On the flip side, the larger the risk is, the larger your potential return may be as well. Many people have been lured in by a large return, only to forget to take into account the potential risk.

The reality also is that many people are not aware of the risk they currently have in their portfolio. When you don’t understand investment risk, it’s easy for emotions to cloud our judgment. We get really excited when we see gains, but a loss can send us into a tailspin of fear or concern.

Everyone should exercise caution when it comes to your investments. But a great way to determine how much risk may make sense for your portfolio, we often refer to this formula:


A Formula We Often Use

While there is no cookie-cutter answer to what your specific investment plan should be without meeting with a financial advisor, generally speaking we like to use the Rule of 100. This rule is often used as a guideline for how much risk you can have in your portfolio, by subtracting your age from 100. It looks something like this:

100 – Current Age = Percentage of Higher-Risk Investment Allocations

The end result is the percentage of higher-risk stocks or investments you could consider having in your portfolio. For example, someone who is 20 years old generally may have 80% of risk in their portfolio, and someone who is 60 would often want to be closer to 40% of risk in their portfolio.

One of the reasons we caution against making decisions only based on a principle like the Rule of 100 is because every person’s situation is different. A hard-and-fast rule isn’t going to take into account the unique circumstances of your life, your long-term goals, or the biggest concerns you are taking into consideration while planning for your retirement.

We like to ask, “How would it impact your retirement if those dollars disappeared?” If you need to rely on the money you have to live off of, then you should be extremely cautious about how much risk you have.

 LISTEN: Income, RMDs, Beneficiaries, & Portfolio Risk: A Grabbag – Episode 12


Additional Resources

Whether you are considering how to fund your retirement in your later years or if you are just starting to make investments, here are some additional resources to take a look at:


And if you would like help making your plan to ensure that your retirement is fully funded, give us a call at 390.263.1333. Our financial advisors would be happy to help you make a plan based on your goals!



210 Financial is more than just numbers. The “210” in our name stands for a childhood home that represented safety, love, and family. That is what we want to provide for everyone that we care for. Welcome home. Welcome to 210.

Investment advisory products and services made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. Investing involves risk including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc. generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. 1887361 – 7/23

Content prepared by Savage Content Co.

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