Selecting your risk tolerance
FutureAdvisor will adjust your recommendations to match your risk tolerance: conservative, moderate, and aggresive
The other determining factor on your portfolio's allocation and design is how much risk you personally would like to bear. FutureAdvisor offers three levels of portfolio risk: Conservative, Moderate, and Aggressive. The one you choose determines how much money will be placed in stocks, or equities; the remainder of your portfolio will hold bonds.
Remember: stock usually provides a much higher return in comparison to bonds; however, it also has much more risk, and you'll have to stomach periods of loss on a more frequent basis.
If you're patient, disciplined, and calculating, and if you can emotionally handle loss, aggressive may be right for you. If uncertainty can work you up, cause anxiety, or if you tend to be impulsive, you may opt for something a bit more consistent.
In any case, please keep in mind, your livelihood will one day depend on this capital, this is the last account within which one should speculate.
The following gives an example of an aggressive asset allocation appropriate for a 30 year old, expecting to retire at 75. Notice that only 7% of the entire portfolio will hold bonds at this period in time.
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