Episode 008:
Know Your Risk Score and Don't Rely on Dumb Luck!


Episode 008 Summary:

Live! From their new podcast studio, it’s a big day for co-hosts Josh Bretl and Dave Schmidt of The Retirement = Freedom Podcast. They’re even pretty sure that at least one of their mothers will be tuning in for sage advice delivered with inimitable (truly) wit and charm!

This episode offers important follow-up on the topic of greed – not what it is, but how to avoid falling prey to it! The first step is defining your appetite for risk. And not in those frequently used, way-too-general terms: Conservative, Moderate and Aggressive. Josh details a more precise way to measure comfort levels relative to where we are in our retirement journey – as well as how it all correlates (or doesn’t!) with market exposure.

You’ll also learn about how a bull market like the one we’ve seen over the past decade can hit the skids, leaving portfolios out of whack and vulnerable to huge losses with long-lasting consequences. Says Josh: “Risk is actually a fun topic once you understand it – and it gives you a lot of power and control!” Definitely, when it comes to financial planning. But as far as how risk relates to selecting from the menu at a sushi restaurant? That’s another kettle of fish (ba-dum-bum!). Exactly what does that mean? Tune in to find out on Episode 8, the one that lifts The Retirement = Freedom Podcast into the top 2 million shows out there today (according to Dave’s research, which may or may not be statistically valid)!

Curious to know more about your risk score? Click here to try out FSR’s free risk assessment tool! The first 18 Elmhurst, IL, locals who take the quiz will receive a complimentary Ne-Mo's Chocolate Chocolate Puddin' Cake!

And if you haven’t tried it already, click here to get $25 off your first order of Cometeer Coffee. It’s the greatest!

You can find previous episodes of The Retirement = Freedom Podcast here.

Talking Points

Introducing … the new, state-of-the-art FSR Wealth podcast studio!

Fun Fact: Research indicates that the vast majority of millions of podcasts have ceased production after seven episodes. Let’s hear it for beating the odds with Numero 8!

Transgenerational Laser Tag: A major fan going back to high school days, Josh has fingers crossed that he’ll be “allowed” to join in at his son’s eighth birthday party!

Josh revisits risk and greed, topics he touched on in Episode 7. (Be patient. The high school basketball glory days and stats riffs eventually tie back to the main point!)

There are three general buckets when it comes to investment risk. Where do you fall?

  • Conservative
  • Moderate
  • Aggressive

Defining risk tolerance is highly subjective and looks different when markets fluctuate.

Josh explains Riskalyze, an FSR assessment tool that takes the subjectivity out of gauging risk. You can learn more about it here.

Two ways that risk scores are calculated:

  • The Rule of 100: Take your age and subtract it from 100. The older you get, the lower your risk score, often a good general rule of thumb.
  • A quiz of the type FSR offers clients, which generates a risk score based on a short series of questions.

Once you have your risk score, what do you do? Step 2 is to know where you sit now, which means: Does your allocation of assets match your appetite for risk?

People’s portfolios can teeter off-balance, which is where risk scores can help temper (and measure for) greed and factor in fear.

Over the past decade or so, dumb luck has been on the side of stock market gamblers who will want to be wary going forward.

Once assets are defined in relation to risk comfort level, the path forward becomes clearer in terms of where to go with investment allocation.

Dave Relates to Retirees: He’s recalling the time Josh’s sushi recommendations required risk mitigation. That said, his risk tolerance is high when it comes to free food!

Smart retirement strategy requires:

  • Establishing your risk score.
  • Deciding where you want to sit in relation to it.
  • Finding a definition more nuanced than: Conservative, Moderate, Aggressive.
  • Taking FSR’s free quiz. It’s easy and informative!

Quotable Quotes

“You can’t control what you can’t measure. You can’t fix what you can’t measure … It’s sometimes eye-opening for clients to actually see how risky they are.” (Josh)

“When someone sits down with you, they are essentially getting financially naked because they have to tell you so much information. So I imagine the more honest they are, the more accurate the score.” (Dave)

“If your comfort level is at a 30 (score) and your assets are at a 70 – We see that all the time and it’s truly disturbing to a lot of people.” (Josh)

“People have liked seeing all this good stuff happen in the market, but the risk has gotten out of whack and they haven’t taken money off the table. That could really impact their retirement.” (Josh)

“The risk score tries to make you honest with yourself; tries to take that greed and fear out of the equation – or at least understand where it fits so that you’re making decisions less with your emotions and more with your head.” (Josh)

“Really the last 12 years have been incredible in the stock market. And so dumb luck has served people who are aggressive and had that greed factor built into them, well. But that is something that will not continue in the future. And if you're willing to bet your retirement assets on dumb luck, I'm sorry.” (Josh)

“In a volatile market you need to understand what your risk score is and where you’re assets sit in terms of risk comfort level and from there you can take action.” (Josh)

Episode Extras

About your Co-Hosts

A certified public accountant, Josh Bretl has spent the past two decades growing FSR Wealth Strategies into a firm that specializes in tax-focused retirement planning. Because taxes have the single biggest impact on how much you can spend in retirement, Josh is dedicated to developing individualized financial plans that extend and grow his clients’ retirement savings. Based in Elmhurst, Illinois, FSR Wealth strategically preserves and maximizes resources through tax-efficient strategies designed to fulfill retirement dreams.

Apart from producing and co-hosting The Retirement = Freedom Podcast, Josh's longtime friend Dave Schmidt is a content production and marketing adviser to local businesses and nonprofits. He’s also an advocate for t-shirts, all things 90s (especially the music), short walks and long naps. A serial “wallet forgetter,” Dave nonetheless swears that he has picked up the check on at least one or two meals with Josh over the years. Evidence pending.

Standard Disclaimer:
FSR Wealth Management is a registered investment advisor located in Elmhurst, Illinois. Information and opinions contained in this audio have been arrived at by FSR Wealth advisors. All information herein is for informational purposes and should not be construed as investment advice. It does not constitute an offer, a solicitation or recommendation to purchase any security. FSR is not providing legal, tax, accounting, or financial planning advice in this audio. These views are as of the date of this publication and are subject to change.

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