If a client 'needs' a higher rate of investment return than the portfolio they are likely to be comfortable with is expected to earn, writes Greg Davies, then they need better needs, not riskier investments
Should the return a client ‘needs' to meet their set of goals be a consideration when deciding how much risk to take with a portfolio? It is a tempting thought, it is easy enough to calculate and it certainly sounds plausible. Unfortunately, it is dead wrong. This is not to say a client's goals do not have a role to play in the construction of a risk profile. They do. But they do so because the amount and time horizon of each goal should form part of a comprehensive assessment of risk capacity, and consequently of a risk profile. In other words, a client's goals should already be account...
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