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Step 10: Risk Capacity

Risk Capacity 100: Red Most Aggressive: Individuals who score 100 on a risk capacity survey (scaled from 1-100) likely possess nerves of steel with a general proclivity toward high risk activities tantamount to skydiving, NASCAR racing, surfing typhoon waves, or other extreme sports. This type of investor has a strong gut for withstanding extreme volatility in exchange for maximum portfolio growth potential; a substantial amount of investable capital; a secure income stream and in-depth knowledge about how the stock market works. These investors may be relatively young, with the capacity to wait at least 15 years before withdrawing as much as 20% of their investments. Over the course of their investment’s lifetime, these individuals are able to expose their capital to high levels of risk and commit to staying the course during considerable market volatility, such as the 57% decline that occurred over the 1-year, 4-month period from November 2007 to February 2009, and the wild upturn from March 2009 through December 2013 which produced a 205% total return. Along with their ability to take on high risk, they are very disciplined in buying, holding and rebalancing asset classes without jumping in and out of the market. They are willing to tie themselves to the mast and ignore the media and doomsayers who sing their siren songs with intensity. At the end of Step 11, you can see Index Portfolio 100. Very few investors have a risk capacity of 100. Please take the Risk Capacity Survey before investing any capital at this level of risk.

Index Funds: The 12-Step Recovery Program for Active Investors  

This book reveals the potential land mines and pitfalls of active investing and educates readers on the benefits of passive investing with i...

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