What we mean by risk profile, and how it shapes your portfolio

At Herr Wealth Advisory, we don’t view your risk profile as a simple label or a one-time quiz result. It’s a meaningful, evolving insight that helps guide how your investment strategy supports your financial journey.

Your risk profile reflects more than your comfort with market changes. It considers how much uncertainty your financial plan can absorb, how you respond to volatility, and what level of growth is required to help you reach your goals.

What are we actually measuring?

When we assess your risk profile, we’re not measuring your fear or nervousness – we're measuring your relationship with volatility. That’s an important distinction.

Volatility refers to the natural ups and downs of markets. It’s not something to be scared of – it's the trade-off for long-term growth. What matters is how your plan accounts for it, and how you respond when it happens.

We consider three key dimensions:

1. Risk capacity: What can your financial situation absorb?

This is the objective side. It includes your time horizon, income requirements, and how much flexibility or liquidity you need. It tells us how much risk your plan can realistically manage.

2. Risk tolerance: How do you feel when markets move?

This is behavioural. It reflects how you emotionally process market swings, and helps us understand how you might respond to periods of uncertainty.

3. Risk need: What level of return is required to meet your goals?

This is strategic. If your plan relies on a certain amount of growth, we may need to include investments with more volatility, balanced with strategies to help you stay on track.

How it informs portfolio design

Once we understand your full risk profile, we build an investment approach that reflects it – not just in broad terms like “conservative” or “aggressive,” but in a way that aligns with your unique circumstances and objectives.

That means we:

• Align investments with your income needs, so you're not pressured to sell in down markets.
• Segment your portfolio by time horizon, using short-term reserves for stability, mid-term strategies for consistency, and long-term allocations for growth.
• Build flexibility into your plan, so we can adapt as your life – and your comfort level – evolve.
   

A risk profile that evolves with you

We don’t “set it and forget it.” We revisit your risk profile regularly – not just because the market changes, but because your life changes.

Why? Because your portfolio should reflect more than your age or account balance. It should reflect your story, your goals, and your confidence in the journey ahead.

Ready to see how your investments align with your goals?
Let’s explore your risk profile together and build a strategy that reflects your timeline, your comfort level, and the life you’re planning for.