By
Paul Lemon, CPA/PFS, CFPâ
Step 1: Current Allocation to Equities
Current Stock Allocation Percentage from page 2 of your
“Investment Allocation” Worksheet:
“Stock Allocation Percentage” ___________%
Portfolio # ________ with a potential risk of loss of __________% most closely resembles your portfolio (from the same Worksheet as Step 1)
Step 3: How Much Your Investments Could Decline in Value?
Result from Question 4a of the “Paying for My Retirement Dream” Worksheet
Total Balance of Combined Savings/Investments: a)$________________
Times:
“Loss %” from Step 2 above b)_____________%
Equals:
Potential downside loss to your existing portfolio $<_________________>
Step 4: How Much You Could Tolerate in Terms of a Decline?
Decrease in value in your investments you could tolerate: a)$_______________
Divided by:
Total Balance of Combined Savings/Investments:
Step 3a b)$_________________
Equals:
Adjusted Tolerable Loss Percentage (4a/4b) _____________%
Stock Percentage from “Investment Allocation” Worksheet
on the same row that is closest to your Tolerable Loss
Percentage Above _____________%
This final percentage should serve as a guideline in determining your true risk tolerance and portion of your portfolio that should be invested in stocks, equity mutual funds, investment real estate, and small business entities.