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Step 10: Risk Capacity

Dimension Three Net Worth What is the current value of an investor’s long-term investments or golden nest egg? Net worth is the value of an investor’s assets minus liabilities, or in other words, what is owned minus what is owed. Investors have a positive net worth when they own more than they owe. An individual’s total net worth can provide a cushion against short-term stock market volatility and the uncertainty of future cash needs. Because life itself is a random walk, investors can never be completely certain of what their cash needs will look like tomorrow. The more assets in reserve, the greater the capacity for risk.

Sample Risk Capacity Survey Question: What is the current value of your long-term investments? Please include your taxable accounts, retirement savings plan with your employer and your individual retirement accounts (IRAs). A. B. C. D. E.

Less than $25,000 $25,000 to $50,000 $50,000 to $100,000 $100,000 to $250,000 $250,000 or more

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