Caution: The following content is not financial advice. If you do not have a professional financial advisor or wealth manager guiding you, these strategies may not be suitable for you. In many cases, a more prudent approach for individuals is to invest in passive ETFs or mutual funds. Please consult a financial professional before making investments.
Risk assessment is a common practice in the financial industry. Most advisors will recommend that you invest according to your risk tolerance. If you’re risk-averse, they’ll often suggest "less risky" assets like government bonds, CDs, or diversified mutual funds and ETFs. But is that always the right move for your financial future?
At Fox Hill Wealth, we take a slightly different approach. While we use risk assessments to understand how our clients feel about investing, we believe your financial goals should be the ultimate priority—not just your comfort level with risk. For example, if you're 45 years old and want to retire in ten years with a specific net wealth goal, but you're highly risk-averse, something has to give. In these scenarios, it’s our job as your financial coach to help you find the right balance between reaching your goals and managing your emotions around risk.
Reframing What’s "Risky"
It’s important to redefine what we mean by risk. Most people consider a traditional savings account a "safe" option—after all, it’s insured by the FDIC. But what about inflation? With a typical savings account yielding less than 1% per year, you’re actually losing buying power over time when inflation rates are considered. Even with a high-yield savings account at 5.5% APY, if inflation is 8%, as it was in 2022, you are effectively losing 3% of your money’s value.
Compare this to the average annual return of the NASDAQ over the past 17 years, which stands at 16.87%, provided you remained invested and didn’t try to time the market. After accounting for inflation, you could still end up with about 9% on your investment—a far better outcome than leaving money in a low-yield savings account.
The reality is that conventional financial advice often prioritizes risk tolerance over growth, which can significantly impact your long-term financial outcome. The accepted average return of a “successful wealth manager” is often quoted at 7-8%, which, after inflation and management fees, can leave you with a real return of just 3-5% on your money.
Why Understanding Risk Analysis Matters
Understanding risk analysis is not just about how much market volatility you can tolerate—it's about recognizing the risks that come with inaction. Many people assume that being "risk-averse" means keeping money safe in cash or low-yield bonds, but this strategy can be riskier than it seems. Inflation is the silent thief of your purchasing power; over time, it can erode your wealth much more than short-term market fluctuations.
Effective wealth management involves balancing the stability of savings and the growth potential of investments. A financial plan that only focuses on risk avoidance may result in falling short of your financial goals, particularly if your dreams include a comfortable retirement, buying a second home, or leaving a financial legacy for your children.
Our Investment Philosophy at Fox Hill Wealth
At Fox Hill Wealth, our investment management approach is based on actively seeking opportunities for growth while being mindful of risks. We’re not just trying to match the average market return; we’re looking to outperform it where possible by leveraging market knowledge, strategic timing, and a commitment to personalized portfolio construction.
We actively manage our investment portfolios in-house, with our experienced investment committee guiding every decision. We employ growth and journey funds designed to balance downside protection with the need for long-term growth. Our "journey funds" provide a diversified base designed to reduce risk, while our "growth funds" allow us to take calculated risks in high-potential industries.
We believe in investing not just in companies but in trends. This means that we carefully evaluate macroeconomic trends, such as government policy shifts or technological advancements, as well as microeconomic trends, such as industry developments and individual company performance. By staying on top of these factors, we can position our clients for success in an ever-changing marketplace.
The Misconception of "Safe" Investments
One of the most common misconceptions in financial planning is that low-risk, "safe" investments will always serve you best. The truth is, safe investments can also lead to missed opportunities. For instance, keeping all of your assets in a high-yield savings account or government bonds might give you peace of mind, but over time, the real rate of return after inflation can leave you with less purchasing power.
Historical data consistently shows that growth assets like stocks have outperformed cash and bonds over long periods. The S&P 500, for example, has averaged an annual return of around 10% since its inception. By avoiding these assets, you are missing out on the potential for significant wealth accumulation.
This is why we work closely with our clients to look beyond just risk assessment. We focus on building diversified portfolios that offer a mix of stability and growth. Yes, investing in the market involves a level of uncertainty, but that uncertainty is also what allows your wealth to grow over time.
Risk Tolerance vs. Financial Coaching: The Fox Hill Difference
Our view is that risk assessments should serve as a tool to understand your financial psychology rather than as a strict guide for how your portfolio should be constructed. Risk tolerance questionnaires are great for understanding how you feel about investing, but they shouldn’t be the driving force behind your wealth management strategy.
Instead, we work with you to develop a strategic financial plan that aligns with your specific life goals—whether that’s retiring early, starting a business, buying a vacation home, or supporting your children’s education. Once we understand what you want to achieve, we tailor an investment strategy that aligns with those objectives, even if it involves stepping a little bit out of your comfort zone.
Financial planning is about more than managing risk—it’s about understanding the relationship between risk and reward and then making informed decisions to achieve your goals. When you work with Fox Hill Wealth, our role is to help you navigate both the opportunities and challenges, coach you through the emotions that investing can bring, and help you stay the course toward financial independence.
What Does Risk Really Mean?
There’s an important distinction between “good” and “bad” risks. At Fox Hill Wealth, we like to think of “good risk” as the kind of risk that is measured, calculated, and intentional—the kind that has a clear reward potential based on a solid foundation of research and strategy. “Bad risk,” on the other hand, is speculation—throwing money at something without understanding the consequences or potential outcomes.
Successful wealth management is about managing risk, not avoiding it altogether. A well-diversified portfolio that includes equities, fixed-income securities, and even alternative investments can help manage volatility while ensuring that you’re taking advantage of growth opportunities. Investment management done well is all about weighing the risks and rewards and positioning you to benefit from opportunities while protecting your downside.
How We Manage Risk to Achieve Your Goals
We’re focused on risk analysis that goes beyond the basic risk assessment questionnaire. We use sophisticated modeling techniques to understand how different asset classes may perform under various market conditions. We stress-test our portfolios, which means we look at how your investments would perform in a range of market scenarios—from the very good to the very bad. This analysis helps us create a balanced portfolio that aims to achieve your goals without exposing you to unnecessary risks.
At Fox Hill Wealth, we also use strategies such as diversification, rebalancing, and tax-loss harvesting to reduce risk and enhance the overall return of your investments. Diversification helps us spread risk across different asset classes while rebalancing ensures that your portfolio stays aligned with your financial goals. Tax-loss harvesting, meanwhile, can help reduce your taxable income, allowing you to keep more of your investment gains.
The Real Risk: Not Taking Enough Risk
One of the most significant risks we see in financial planning is not taking enough risk. This may seem counterintuitive, but when people are overly cautious, they may miss out on the opportunity to grow their wealth effectively. The cost of inaction—of letting fear prevent you from making growth-oriented decisions—can be greater than the cost of short-term volatility.
Investing isn’t about gambling; it’s about making informed decisions based on long-term data and market trends and understanding your financial goals. By understanding and managing risk, rather than avoiding it altogether, you position yourself to achieve more significant financial rewards over the long term.
A Personalized Approach to Investment Management
At Fox Hill Wealth, we take a personalized approach to investment management. We work directly with each client to develop a strategy that meets their financial needs and aligns with their personal risk tolerance and long-term aspirations. We understand that no two clients are the same, and neither should their financial plans be.
If you want to learn more about how our team can help you grow your wealth while managing your risk effectively, we encourage you to contact us. We’re always here to provide the support and guidance you need to make informed financial decisions. Whether it’s for retirement, a significant life goal, or simply for peace of mind.
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